Joe Biden Wins Presidential ElectionNov 11, 2020
- EUR/USD 1.1820
- DOW JONES 29’420.92
- USD/CHF 0.9155
- SMI 10’360.69
- EUR/CHF 1.0820
- CRUDE OIL 42.37
- USD/RUB 76.12
- XAU/USD 1’876.00
Volatility came back to the EUR/USD parity at the start of the week. After trading at 1.1650 the day after the US presidential election, it jumped to 1.1920 on Monday. And while President Trump has yet to concede defeat, the whole world has congratulated Joe Biden on his victory. But the spectre of a painful transition undoubtedly weighed on the US currency at the end of last week. Donald Trump’s attitude in the coming days will have an impact on Joe Biden’s room for manoeuvre until January 20. If the outgoing President quickly concedes defeat, he would give camp Biden access to the $10 million allocated to finance the transition of power and facilitate the transfer of files. Otherwise, the US government would be blocked until the final decision, which could come from the Supreme Court in several weeks.
Monday saw a complete change in the market trend. After the announcement by Pfizer and BioNTech that their vaccine against COVID-19 protected nearly 90% of people treated, the markets were euphoric. The single currency, which had risen to 1.1920, lost 100 points in around 40 minutes. The greenback also rose strongly against the franc, more than 130 points, bringing it from its highest value since 2015 below the 0.9000 mark. Against the Japanese yen, the US currency rebounded 200 points. The movement was just as strong for precious metals, where gold lost almost $100 and fell to $1,850.00 an ounce. All the safe havens have lost a fair amount of ground with this news that many had hoped for a long time. Major stock markets rebounded strongly as optimism also buoyed oil prices. The barrel of WTI rebounded 10.3% to $41.00 and the Brent followed with a rise of 9.2% to $43.06 on the same day.
On the economic front, the US created 638,000 jobs in October, surpassing expectations that stood at 580,000. The recovery was particularly strong in the private sector, with 906,000 new jobs against 680,000 expected. The unemployment rate fell by 1.0% in October, to 6.9%, against 7.6% expected and down from 7.9% the previous month. Of the 22 million American workers who have lost their jobs since the start of the pandemic, half have found employment. As for the Fed, it left its rates and its asset buyback programme unchanged as was widely anticipated. “Economic activity and employment have continued to recover but remain well below their levels at the beginning of the year”, read the meeting minutes. The Fed also declared: “The path of the economy will depend significantly on the course of the virus. The ongoing public health crisis will continue to weigh on economic activity, employment, and inflation.” No mention was made of the presidential election, pointing to the institution’s independence.
This return of the market’s risk appetite and therefore the general decline in safe-haven securities made it possible to lower the pressure on the franc, which had been unable to return to 1.0700 against the single currency. Demand deposits with the SNB remained virtually unchanged for last week but there is no doubt that the bank remains vigilant and will not hesitate to intervene again as Andréa Maechler repeated. This reversal offers some temporary respite for the SNB. The institution also published some data regarding its investments. The bank currently holds $127 billion in US stocks. At the end of September, it held shares in 2,430 American companies, including $7.8 billion in Apple shares. Investments in this asset class represent 20% of its reserves.
The New Zealand dollar rebounded against the US dollar this morning and is trading at a 19-month high. The Central Bank of New Zealand kept rates unchanged at 0.25% and announced the launch of a new Funding for Lending Program for the month of December. The purpose of this new plan is to keep the cost of refinancing for banks low. But above all, the institution was much less pessimistic about the future of the economy. In the process, the 10-year government bond rate rose 15 points to 0.87% and the market no longer believes in negative rates in 2021.