Forex news from the European trading session - 15 October 2020
Headlines:
- UK health secretary confirms London to move into Tier 2 of lockdown system
- Dutch PM Rutte: UK movement necessary for a Brexit breakthrough
- European equities extend fall in opening hour of trade
- China says will take countermeasures if US insists on sanctions to banks over Hong Kong crackdown
- Brexit language said to have toughened in latest EU summit draft
- UK chief Brexit negotiator Frost reportedly told Boris Johnson not to walk away from talks
- What is priced in for RBA policy going into the year-end?
- Germany posts a record 6,638 new daily coronavirus cases in latest update today
Markets:
- USD leads, AUD lags on the day
- European equities heavily lower; E-minis down 0.9%
- US 10-year yields down 2.8 bps to 0.698%
- Gold down 0.3% to $1,894.80
- WTI down 2.7% to $39.93
- Bitcoin down 0.5% to $11,338
The market was caught up in a risk-off wave in European trading today, as regional stocks slumped heavily on the session alongside a drop in US futures.
The virus situation in the region is worsening still, with Germany posting a record increase in daily cases today following that of Italy yesterday.
That alongside a setback in US stimulus talks, election uncertainty, and the potential for Brexit drama are among things weighing on sentiment today.
There was a slight risk-off tilt at the start of the session, with European indices opening around 1% lower but that quickly turned into heavy selling in the opening hour and after.
The DAX fell by 3% at one point with Nasdaq futures seeing a decline of almost 2%.
That put bids into the dollar, yen and franc with EUR/USD slipping from 1.1740 to 1.1703 and AUD/USD extending losses from 0.7130 to 0.7067 during the session.
USD/CAD also made some headway in a push from 1.3150 to 1.3200 as buyers try to take a peek above the figure level and the 200-hour moving average.
Meanwhile, the pound was a notable loser as cable slumped from 1.3010 to 1.2910 ahead of the EU summit on Brexit as well as news of London adopting tighter lockdown restrictions. The drive lower was also helped by the wave of dollar strength.
Looking ahead, it feels like the market is sending a bit of a warning shot that any real risk rally may only come after there is more certainty from the US election outcome.
In the meantime, stimulus talks are going nowhere so that will now be tied together to how the election result turns out - especially the Senate seats.
At the same time, the worsening virus situation in Europe, UK and other parts of the world also presents fresh uncertainty surrounding the degree of lockdown measures moving forward and how that will impact the global economic recovery momentum.
