Goldman Sachs: Choppiness Ahead Of The Votes And Vaccines

Goldman Sachs note that the "broad USD recovered some lost ground over the past week, gaining 0.6-0.7% on standard indices. The moves appeared related to three factors:

1. Negative news on covid vaccines and treatment.
2. Rising covid case numbers in a number of regions and renewed restrictions in Western Europe.
3. Pushback on currency appreciation by a few central banks, including explicit comments on the exchange rate from Taiwan's central bank governor and signals from the RBA consistent with easing next month.

• Despite the setback for our USD short recommendations, we do not see reason to change our broader views at this stage: the latest news did not affect the outlook for the leading vaccines, and easing space is very limited across G10 central banks, unless policymakers show more openness to cutting policy rates below (or more deeply below) zero. As we argued last week, we see the risk/reward around the major Q4 risk events as favoring broad USD shorts (our preferred crosses remain EUR, CAD, and AUD in G10, and MXN, ZAR, and INR in EM)."