US stock markets finished modestly in the red yesterday with the S&P500 down 0.2% and the Dow off by 0.3% as investors continued to eagerly watch negotiations in Washington on the next stimulus package.

The day had started off quite positively as House Speaker Democrat Pelosi said there was still a chance for a stimulus deal before the election but acknowledged it might not pass until after 3 November. President Trump later accused the Democrats of being unwilling to craft an acceptable compromise, after the Senate Majority Leader said he did not want to bring a large bill to the Senate floor before the election.

You would think markets are fairly fatigued by this politicking and the constant back-and-forth. Does it help the Democratic Presidential bid to concede ground to enable a deal right now when their candidate is consistently leading in the polls and betting markets? As long as the electorate don’t think they are the main reason for the hold up, then that wouldn’t make a lot of sense.

Similarly, it is well known that many Republican Senators are not ready to vote for a $2 trillion stimulus package, with or without pressure from President Trump. With the election within touching distance, both sides need to be seen to be trying to make a deal as no-one wants to be the villain at this stage in the White House race.

The Dollar has not been liking the week’s events so far, driven by this on-off prospect of stimulus and perhaps more importantly, a growing sense of a ‘Blue tide’ Biden victory. The main US data today will be the weekly initial jobless claims, where any disappointing rise would be the third in as many weeks and cement warnings that job market gains have stalled.

Optimistic Brexit comments from EU's chief negotiator Barnier gave a boost to the Pound yesterday, which rallied to its highest level since the start of September and its largest one-day gain since March. Talks are set to restart and will aim for an agreement in mid-November, allowing for plenty of time for volatility to rise once again.

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