US President Donald Trump’s tweet has shaken the financial industry once again. Yesterday, October 06, the US president said he will be delaying any stimulus talks until the election is over. Just a few days before this tweet, the House of Representative passed a bill allocating another $2.2 trillion stimulus to the public. Although this news will be bad for the overall US economy, this will be beneficial for the US dollar. The less greenback is in circulation, the higher the demand will be. Thus, this tweet will push the US dollar higher in the coming weeks. On the other hand, the disappointing results from Australia will support the expected decline in the AUDUSD pair. Imports for the month of August came in at 2.0%, a huge gap down from 7.0% figure recorded in the prior month. Meanwhile, its exports remained in the negative territory at -4.0%. Trade balance report entered its lowest value for the past two (2) years with $2.64 billion.
Both Canada and Australia published their Imports, Exports, and Trade Balance reports this week. For Canada, its figures for these reports were $47.38 billion, $44.93 billion, and -$2.45 billion respectively. However, despite incurring a negative trade balance report and a weak export industry, the Canadian dollar will still thrive against the Australian dollar. Looking at Canada’s past performance for these reports, the figures were comparatively consistent compared to Australia. In fact, its trade balance report improved by $45 million for the month of August. Meanwhile, Australia’s trade balance change for the said month was $1.97 billion from its previous report and $7.96 billion in May 2020. Also, Australia’s Services Index took a hit after it fell from 42.5 points to 36.2 points last month. This means that Australia is yet to recover from the economic effect of the pandemic. An above 50 points reading suggests that the report is expanding.
The Swiss franc is gaining momentum. Since June, the AUDCHF pair has been trading in a channel. The catalysts for this was that investors are looking back to safe-haven currencies fueled by uncertainty in the global market. It’s already six (2) months since the pandemic started but vaccines are yet to be discovered. Some analysts said that even if there will be a vaccine before the year ends, it will take another year to make it publicly available. As for Australia, the coalition government recently outlined its planned budget which will incur a $216 billion budget deficit. This represents a massive 11% of the country’s gross domestic product (GDP) for the fiscal year. Although this will help the Australian economy to get back on track, this will be devastating for the Australian dollar. The federal budget includes two (2) $250.00 cash payments to pensioners, a limited time hiring credit for businesses, and $12.8 billion in personal income tax cuts.
The worst might be over for the Japanese yen investors. Japan will be publishing its final reading of the country’s Q2 GDP growth today, October 07. Analysts are expecting a contraction of 28.1%, a bit lower compared to the US’ result. The country’s leading index, designed to predict the future economic health of the country based on 12 indicators, is pointing out to better months to come. The figure for today’s report was 88.8 points, 2.1 points higher than the prior month. This figure was also 2.1 points lower compared to its pre-coronavirus figures. Foreign investments in stocks and bonds are also expected to pick up following a sell-off in the previous report. An important catalyst that investors should consider for the GBPJPY pair was the end of the Brexit transition on 01 January 2021. Currently, there are hints to a possible concession from the UK and the EU. However, there are also some who see a no Brexit deal scenario.