Joe Biden Widens His Lead, BoE and Fed Policy Meetings

Equities Gain as Biden is Seen More Likely to Win

The US dollar traded lower against all but one of the other G10 currencies on Wednesday and during the Asian morning Thursday. It lost the most ground versus NOK, SEK, and CAD in that order, while it eked out some gains only versus GBP.

BoE Expands QE More than Initially Anticipated

Apart from headlines surrounding the US election, during the early European morning, we also had a BoE monetary policy decision. The Bank decided to keep interest rates unchanged at 0.10%, but expanded its asset purchase program by more than initially expected. According to economic calendars, expectations were for a GBP 100bn increase, but instead, the Bank decided to go for a GBP 130bn expansion. In the statement accompanying the decision officials noted that the outlook for the economy remains unusually uncertain and that they stand ready to increase QE again if market functioning worsens.

Fed to Take the Central Bank Torch

Later in the day, it will be the Fed’s turn to decide on policy. At its most recent meeting, the Committee kept its policy unchanged, but changed its inflation language noting that they “will aim to achieve inflation moderately above 2% for some time so that inflation averages 2% over time”. With regards to the new dot plot, it showed that interest rates are likely to stay at present levels at least through 2023. That said, looking at the details, we see that one member was in favor of a hike in 2022, and four saw rates higher in 2023. Combined with the inflation forecast of 2023, which is at 2%, this shows that some members may not be willing to tolerate inflation above target for long as pointed in the decision statement.

DAX — Technical Outlook

From the last trading days of October, the German DAX index has been moving comfortably to the upside. Yesterday, the price jumped above a short-term downside resistance line taken from the high of October 12th. At the same time, the index continues to balance above a short-term tentative upside support line drawn from the low of October 30th. As long as DAX stays above both of those lines, we will remain positive, at least with the near-term outlook.

GBP/USD — Technical Outlook

GBP/USD moved higher this morning, after the BoE announcement. Despite still trading below a short-term tentative downside resistance line taken from the high of October 21st, the pair still has a good chance of drifting higher, if the price momentum stays in the positive territory on the RSI and the MACD. In order to get a bit more excited with slightly higher areas, we would prefer to wait for a push above the 1.3050 barrier first.

As for the Rest of Today’s Events

Besides the BoE and Fed meetings, we also get Eurozone’s retail sales for September and the US initial jobless claims for last week. The Euro-area retail sales are forecast to have slid 1.0% mom after rising 4.4% in August, while initial jobless claims are expected to have declined somewhat, to 732k from 751k.

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