Forex Today: Dollar takes a breather ahead of critical US GDP, covid-clouded ECB decision

Here is what you need to know on Thursday, October 29:

Markets are attempting recovery and the dollar is down, partially reversing Wednesday's trends. The German and French lockdown announcements serve as a stark backdrop to the ECB's decision. US GDP ahead of the elections, where Biden continues leading. 

Bounce: Asian and European stock markets and S&P futures are rising after a sell-off on Wednesday. The recovery has no significant driver. On Wednesday, the mood soured as both Germany and France announced month-long lockdowns to battle the spread of COVID-19. 

Economists expect the European Central Bank to leave its policy unchanged, but some suspect that the Frankfurt-based institution will respond to the new measures foresee an economic hit and act already now by enlarging its Pandemic Emergency Purchase Program (PEPP).

It could also opt for a hint of action in December when staff release new forecasts. Christine Lagarde, President of the European Central Bank, will meet the press and will also be asked about the bank's strategic review and the option of cutting rates.

See:

• ECB Rate Decision Preview: The question is not if but when
• ECB Preview: Three charts show why Lagarde could send EUR/USD tumbling

The first release of US Gross Domestic Product for the third quarter is set to show an annualized growth rate of over 30%, a sharp comeback after the downfall in the second quarter. Personal consumption and government spending are among the closely watched components. 

See: US Third Quarter GDP Preview: Must what goes down, come up?

The critical figure is due out five days ahead of the elections in which over 75 million Americans have already voted. Recent opinion polls continue showing President Donald Trump trailing behind rival Joe Biden. Nate Silver's FiveThirtyEight is pointing to an 88% chance for the Democrat to enter the White House.

The battle for the Senate is closer. The Republicans have around 25% probability of holding onto the upper chamber. Markets are eyeing a full victory for Dems – aka "blue wave" – that would then pass a massive stimulus package.

EUR/USD Forecast: How three US election outcomes (and a contested result) could rock the dollar

Brexit: GBP/USD is holding up better than other currency pairs as the EU and UK negotiators have reportedly made progress in talks. Negotiators are in the process of writing the treaty on state aid but remain at odds on the politically sensitive topic of fisheries. Talks now move to Brussels.

Prime Minister Boris Johnson continues contemplating a full lockdown, amid high coronavirus figures in the UK. 

The Bank of Japan left its policy unchanged as expected but downgraded its economic outlook. USD/JPY has bounced from the lows, in line with the market recovery. 

The Bank of Canada also stayed put in its October decision and warned that US growth is considerably slowing. On the other hand, the Ottawa-based institution tapered down its bond-buying scheme. USD/CAD is hovering around 1.33 while WTI Oil remains on the back foot just above $37. 

Cryptocurrencies: Bitcoin has stabilized above $13,000 after temporarily dipping below that level on Wednesday. 

More Gold has three ways go in response to the 2020 Presidential Elections