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Macro-Factors to Move Financial Markets in the Months Ahead

September 28, 2020 By Mircea Vasiu

The trading year will likely be over after the U.S. elections in November, as investors will prepare for the end of the year holidays. However, there is a long road until then, with macro-events that could easily shift the world’s balance of powers.

The currency market is always the first one to react to such events. It all starts with this week – tomorrow is the first presidential debate ahead of the much-awaited event at the start of November.

Trump Paid Only $750 Income Taxes in 2016

Over the weekend, the New York Times revealed that President Trump paid only a little over $700 in taxes in 2016, the year he won the presidency. To many Americans, it shows why he avoided revealing its income tax statements so far, as he paid less than the average American worker in taxes.

The fact that such info comes out ahead of the first debate scheduled for tomorrow should not come as a surprise. In fact, the market will likely see increased volatility as polls will indicate what the possible outcome of the elections would be.

There are three debates scheduled ahead of the November 3rd Presidential Election – one in September and two in October, and they represent the market’s focus. Everything else comes in second place, despite other macro-events being scheduled.

One, for instance, is the ECB decision on the 29th of October. At the end of this week, we will see the HICP data for September, and if it disappoints (i.e., falls below zero), the ECB is forced to act at the next meeting. Therefore, the Euro traders will focus more this coming Friday on the HICP data rather than on the NFP. The risk is tilted to the downside, with inflation likely to fall further.

Last but not least, two days after the elections, the Federal Reserve holds its press conference and issues the FOMC Statement. So far, the Fed easing runs at the minimum possible, with the uncertainty about the election’s outcome being one factor to sit and watch.

However November’s Fed decision is likely to be decisive for the rest of the year. With the markets digesting the elections’ result, the chances are that the Fed will act before December in terms of expanding its quantitative easing program.

In other words, the wild card from a macro-perspective remains the election day and everything that happens in the month before. As a trader, one should not get too attached to a position, as the market may change on nothing at all.

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