Morning Brief – US Dollar and a Biden Victory

US Dollar and a Biden Victory

Yesterday the market reflected the belief of a likely Biden victory which is expected in turn to cause a period of volatility. Biden is expected to spend large on an economic stimulus and to take a less restrictive approach to international trade which will strengthen other currencies versus USD. EUR/USD implied volatility was at its highest level since March and more than twice as high as at the beginning of this week. In the past 24 hours, USD weakened versus EUR and JPY strengthened marginally reflecting its safe haven status. Given the Democrat hopes and aspirations in this Election, and the expectation of Biden supporters that it is a done deal for Biden to get to the White House, it is perhaps not unexpected that Biden supporters are reported to be far more likely to be angry than Trump supporters if their candidate loses. Maybe just maybe there will be clarity later this morning -to save those Democrats from being cross.

China and Australia

Reductions in Chinese imports of wine, coal and sugar from Australia were a result of individual buyer decisions and nothing to do with a state diktat-said China yesterday. Those individual decisions are reported as being taken as a result of Chinese officials leaning on the buyers. Additionally timber from North Queensland, Australian lobsters, red wine and barley have been added to the list of cancelled “buyer decisions.” In a further test to the credibility gap, the reasons behind the halt to timber was the fear of Australian pests in the shipments. And the lobsters? A sudden enthusiasm by China to guarantee food safety. And the halt in red wine purchases? Unclear, but for anyone who has tried Chinese red wine, it definitely is not because of the quality of domestic Chinese red wine production.

The Loonie: Take Off

What about CAN$ in the fallout from a likely change at the White House? Can$ is slated as likely to appreciate. Already up 11% against USD since March, in the past 2 months CAN$ has plateaued but with a likely large US economic stimulus, this will be positive for CAN$. As a largely commodity backed currency CAN$ is sensitive to the outlook for the global economy and subject to Covid receding and economies recovering, the CAN$ is more likely than many other currencies to strengthen from its current level of 1.31 versus USD which funnily enough is where it traded in that other world in mid January 2020.

Great Balls of Fire

It was at this time 63 years ago in 1957 that this most appropriate song for the incumbent President of the USA was released by Jerry Lee Lewis. Selling 5 million copies and reaching Number 1 in the UK and Number 2 in the USA, Great Balls of Fire is one of the most successful singles of all time. Here’s why:

You shake my nerves and you rattle my brain
Too much love drives a man insane
You broke my will
But what a thrill
Goodness gracious, great balls of fire

I laughed at love ’cause I thought it was funny
But you came along and moved me honey
I’ve changed my mind
This love is fine
Goodness gracious, great balls of fire

Kiss me baby
Woo, it feels good
Hold me baby, yeah
You gotta let me love you like a lover should
You’re fine, so kind
I’m gonna tell this world that your mine, mine, mine, mine

Discussion and Analysis by Humphrey Percy, Chairman and Founder

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