Renewed lockdowns are weighing on the euro at the start of this week, with EURUSD trading at its lowest since September while the US dollar is benefiting from safe-haven flows ahead of the elections. Greece and Austria are implementing a partial lockdown starting Tuesday, while Belgium also closed schools for the coming two weeks. Italy’s Premier Giuseppe Conte is due to address parliament today ahead of the evening cabinet meeting and may mention a travel ban between regions and close shopping malls, according to local newspapers Corriere Della Sera and La Stampa. German Chancellor Angela Merkel will address the public at a news conference at 13:00 GMT in Berlin. Over the summer, European leaders repeatedly stated they would do everything to avoid renewed lockdown measures to foster a smoother economic recovery, but the recent surge in cases left them with no other choice. Friday’s Q3 GDP data showed that the eurozone posted record growth figures, but with the economic aftermaths of the renewed lockdowns looming, the GDP figures almost became redundant. This morning’s data front included mild increases in October’s manufacturing Purchasing Managers’ Indices from Spain, Italy, France, Germany, the Netherlands and the eurozone as a whole. Germany was the star performer by a wide margin, with factory orders posting a record growth. Although the euro was trading slightly firmer on the back of the figures, Germany’s recently imposed measures suggest that at least some of the factory activity may be curtailed in the months to come.

   

Stricter containment measures announced in Europe over the weekend has rejuvenated the haven flow into the dollar again in today’s trading session, just hours before the US electorate head to the polls for the 2020 election. The last batch of polls conducted over the weekend saw more support for Biden announced in key swing states such as Arizona, Pennsylvania and Wisconsin, but a narrowing in swing state Iowa where Biden led Trump by just one percentage point at 49%. Due to the mechanics of the Electoral College and different vote-counting laws between states, a handful of battleground states will be of outsized importance to the result, and in the event of a close race, the results may be difficult to call quickly. The key state of Pennsylvania has seen around half of its voters send ballots via the mail, but these votes cannot be counted until 7.am on Tuesday. Some counties are not expecting to be finished with vote counting until the end of the week. In contrast, the equally important state of Florida, which is all but essential for a Trump White House, is expected to announce results within a few hours of polls opening - although a very close race may take longer to determine. With this in mind, tomorrow is expected to be a key day for markets given the nature of this year’s election and the heightened level of uncertainty around both the counting process and likely outcome. 

Sterling is the worst-performing G10 currency this morning, after the Government announced a strict national lockdown over the weekend, aimed at curbing rising coronavirus case counts. Importantly, the Government’s highly successful furlough scheme was extended through the initial 27 day period of full lockdown. The policy, which was previously described as “disastrous” and “totally wrong for this country” by Prime Minister Boris Johnson, represents a significant u-turn for the UK Government and appears to have been driven by the latest surge in coronavirus cases. Although the UK economy has recovered fairly well from the previous full lockdown, with consumer spending and house prices rising rapidly, the latest measures significantly raise the risk of deeper economic scars to the economy. The US election will dominate markets this week, but the Bank of England’s Monetary Policy Committee will meet on Thursday and release its latest Monetary Policy Report.