US index futures slipped into negative territory on Monday as the greenback went on a massive offensive (gained both against major and EM currencies). Oil bounced down. US 10yr bond yield dropped indicating some fresh demand for risk-free assets. There are good chances that the last week before the US elections will be marked by risk-off, as by the end of last week there was little confidence that Trump would not resist the outcome of the elections.

Another important theme for the markets is the number of Covid-19 new cases in the US, which has set a new record:

In my view, US government and local authorities currently don’t have means to resist other than returning part of restrictions, decreasing mobility and thus increasing social distancing. But they will probably be less severe than in the first wave. Nevertheless, as we have already seen with the example of European assets, these measures weigh heavily on market sentiments. While the US stock market compensated for the fall in September with subsequent rebound, European equities failed to soar in the same fashion, remaining largely in consolidation mode.

In addition, on Friday we saw the indexes of activity in the EU service sector for September, which behaved significantly worse than the manufacturing ones, i.e. services business is suffering again.

The ECB will hold a policy meeting this week, where the focus will be on regulator's response to the recent weakening of activity in the service sectors and downgrade of the EU growth forecasts by market experts. Together with increased demand for USD on risk-aversion, I would consider another downside correction in EURUSD this week with targets at 1.178 and 1.17:

In addition, the plight of the EU services sector suggests that soon the fiscal or monetary authorities will have to offer some substantial monetary cushion, putting medium-term pressure on the Euro.

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