The Australian Dollar was the worst performing major currency last week. AUD price action weakened sharply in response to increasingly dovish rhetoric from the Reserve Bank of Australia. Reports that China has suspended coal imports from their Australian neighbors likely contributed to the move lower by the pro-risk Aussie against top safe-haven currencies like the US Dollar and Japanese Yen.
US Dollar turbulence continued with the Greenback getting whipsawed by fiscal stimulus talks and political uncertainty. This theme might linger in the days ahead with investor angst and speculation swirling around potential outcomes for the fast-approaching presidential election. Investor expectations for a comprehensive coronavirus aid package before the November election were down-throttled as President Donald Trump and House Speaker Nancy Pelosi struggle to strike a stimulus deal, which looks due to political gambits.
In turn, the broad-based DXY Index edged higher on balance over the last five trading sessions and now trades flat month-to-date. Meanwhile, anti-fiat gold prices dropped about 1% this past week as the US Dollar strengthened against key FX peers. EUR/USD faced considerable selling pressure with spot prices falling 115-pips, or -1%. The move lower by EUR/USD price action also looks driven partly by deteriorating Eurozone economic prospects. This follows mounting restrictions on business activity aimed at curbing coronavirus second wave risk, which could bring crude oil prices into alignment with trader crosshairs.
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Pound Sterling volatility remains heightened in the midst of back-and-forth Brexit negotiations. Recent Brexit developments have highlighted stark differences between the UK and EU on trade, which could lead to a breakdown in talks and rekindle no-deal Brexit risk as key deadlines grow nearer. These aforementioned macro drivers look likely to persist in the week ahead and continue weighing materially on market sentiment. Notable shifts in trader risk appetite around these key themes could correspond with big swings in the direction of major stock indices like the S&P 500 or DAX.
Furthermore, the DailyFX Economic Calendar details several high-impact data releases and scheduled event risk this coming week. Third-quarter China GDP is slated to cross market wires on Monday, 19 October at 02:00 GMT and looks postured to set the tone for broader sentiment. The GBP, CAD, and NZD could get a jolt from the latest inflation figures due out of the UK, Canada, and New Zealand.
Expected commentary from top central bankers such as European Central Bank President Christine Lagarde, Federal Reserve Chair Jerome Powell, and Bank of England Governor Andrew Bailey littered throughout the week will likely be on the radar of traders as well. That said, global PMI reports on tap for release later in the week could steal the limelight and strongarm the direction of markets. What other critical themes and financial market developments are traders watching out for in the week ahead?
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