Citi

With one day left until the US election, selective currencies continue to see risk reduction, with others trading in tight ranges amid light conviction. In terms of the Asia under-performers, we see GBP and AUD testing key downside levels, with renewed lockdowns in the former, and lightening up into Tuesday’s RBA in the latter at play, on top of risk reduction ahead of the election. In EM, KRW, THB and CNH have traded resiliently despite a weaker G10 complex, while MXN is the EM under-performer.

Ahead in terms of data, we await USD ISM manufacturing but expect this to be overlooked today. We also await final October PMIs across G10 which also should not be movers. EM likewise sees PMI prints across parts of the complex, along with HKD retail sales and CLP economic activity.

The USD has notched varying gains against most of the G10 complex in Asia hours. Selective EM currencies have held firm though, but the extent of gains vs the USD in currencies such as KRW, CNH and THB are small a day ahead of the US election. Back to G10, continued risk reduction is likely to be at play along with idiosyncratic risks in AUD (RBA) and GBP (lockdowns).

RBC Capital Markets

Week ahead: The US election will finally be upon us on Tuesday. The most negative outcome for the market would be a prolonged vote count and a contested election. Analysis by our US economics team suggests that President Trump faces an uphill battle on election night. If we assume polling errors similar to 2016, Biden’s lead in the key battleground states shrinks significantly. The problem for Trump is that an outperformance against the polls similar to 2016 would not be enough. He has to do better than that to win, and this conclusion is shared by FiveThirtyEight. That said, we think the more consequential result for the markets is in the Senate. Here, whether Republicans retain control or it flips to the Democrats is a virtual coin-flip.

Later in the week, we have the FOMC policy announcement on Thursday and the US payrolls report on Friday (see USD). Moreover, the RBA and BoE are both expected to announce new policy measures (see GBP & AUD). The Canada employment report is another data highlight (see CAD).

GBP: We expect the BoE MPC meeting to conclude with the proclamation of another round of QE on Thursday, adding a further £100bn in Gilt purchases to take the total target stock of asset purchases to £845bn. The key factors for additional easing are the weaker-than-expected August GDP and the re-introduction of Covid-19 restrictions.

USD: No policy changes are expected from the FOMC, but the market will be paying attention to Chairman Powell’s post- meeting press conference where he will likely reiterate that the Fed stands ready to provide the necessary support to the economy. For October non-farm payrolls, we look for a well- above-consensus headline increase of 1.5 million (consensus 600k). Continuing claims have tumbled recently. Our model suggests a potential increase in seasonally adjusted non-farm payrolls of 1.5–1.8 million, which in turn implies the unemployment rate dropping to about 6.9% from 7.9%. The risk of renewed social restrictions could make for very messy jobs numbers in coming months, but October should be a pleasant upside surprise.

NOK/SEK: The Norges Bank meeting is expected the see the deposit rate stay at 0%, while Sweden Q3 GDP should see a return to positive quarter-on-quarter growth (both Thursday).

AUD/NZD: Expectations are high that the RBA will announce multiple easing measures this Tuesday. We expect an overnight cash rate cut, a 3y yield target, and the TFF rate lowered to 0.10%. The odds of a proper QE program being announced are also high given the RBA’s recent tone, though we have argued that there is merit in leaving this until early 2021.

CAD: Our economists expect the October job report to show a sharp slowdown to just 50K, from +378.2K in September (Friday). The survey week will capture some tightening in social restrictions. This should put further pressure on high- touch industries such as food/accommodation. There are many other categories that were below their February levels in September and these should provide some offset, including construction. Labour force participation has recovered swiftly (65.0% in Sep vs. 65.5% in Feb) and is unlikely to provide much upward pressure going forward. We see the unemployment rate edging down to 8.9%, and think that hours worked may see a small decline after five consecutive monthly gains.

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