Equities Rebound on Stimulus Hopes, PMIs on Investors’ Radar

Pelosi Says Stimulus Legislation Could Pass “Pretty Soon”

The US dollar traded mixed on Thursday and during the Asian morning Friday. It gained against GBP, EUR, SEK, NOK, and CHF in that order, while it underperformed versus AUD, NZD, and CAD. The greenback was found virtually unchanged against JPY.

S&P 500 — Technical Outlook

The S&P 500 index continues to run inside a short-term falling channel formation, which is in play from around mid-October. Although the price recently made its way higher within that channel, still, if the upper side of that pattern remains intact, this may result in another slide. As long as the index remains inside that formation, the near-term outlook could stay a bit negative.

Preliminary PMIs Take Center Stage

As for today, focus is likely to fall on the preliminary manufacturing, services and composite PMIs for October from several Eurozone nations and the bloc as a whole, the UK and the US. These data sets will give us a first taste on how the global economy has performed during the month of October, with the coronavirus keep spreading fast and hitting new record highs in daily infections. Both the Eurozone manufacturing and services PMIs are expected to have declined to 53.1 and 47.0, from 53.7 and 48.0 respectively, something that will drive the composite PMI below the boom-or-bust zone of 50. Specifically, the composite index is forecast to have slid to 49.3 from 50.4. This is likely to prove negative for the euro, as it will reveal that the second wave of coronavirus infections is leaving more marks on the Euro-area economy.

EUR/GBP — Technical Outlook

EUR/GBP is currently trading near the lower bound of its short-term range, which is roughly between the 0.9007 and 0.9162 levels. Wednesday’s sharp decline and yesterday’s consolidation could also be forming a potential bearish flag. However, before examining lower areas, we would need to see a clear break below the lower bound of that range first. Until then, we will take a neutral approach.

As for the Rest of Today’s Events

The only other release worth mentioning is already out and it is the UK retail sales for September. Both the headline and core sales accelerated to +1.5% mom and +1.6% mom from +0.8% and +0.6%, beating estimates of a slowdown to +0.4% and +0.5% respectively.

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