Forex news from the European trading session - 2 October 2020
Headlines:
- Biden expected to get tested for COVID-19 this morning
- ECB's de Guindos: Expect inflation to recover next year
- Eurozone September preliminary CPI -0.3% vs -0.2% y/y expected
- Brexit: UK, EU said to hold more trade talks before next EU summit
- UK PM Johnson to speak with EU's von der Leyen on Brexit matters tomorrow
- ECB says it is to hold public consultation, experiment on a digital euro
- US president Trump tests positive for COVID-19
- Germany reports 2,673 new daily coronavirus cases, the most since April
- Australia announce travel from New Zealand quarantine-free
Markets:
- JPY leads, AUD lags on the day
- European equities lower; E-minis down 1.5%
- US 10-year yields down 2 bps to 0.657%
- Gold up 0.2% to $1,909.20
- WTI down 3.8% to $37.25
- Bitcoin down 1.2% to $10,479
The key news came early on as Trump tested positive for the virus upon quarantining, after news that his close aide, Hope Hicks, also tested positive from earlier in the day.
That led to a wave of risk aversion in the market and understandably so, as this introduces a whole new degree of uncertainty in the US election race - and one that surely nobody can accurately predict its developments in the coming days/weeks.
US futures sold off hard on the news, with S&P 500 futures slumping by as much as 68 points before sticking around to a 1.5% drop currently or a 54 points decline.
The immediate reaction is very much a case of 'sell first, ask questions later', so there could be elements of an overreaction - as in most cases - but we are still in the midst of digesting the news and it is still very much 'fresh' at this stage.
The selloff in equities saw bids into the dollar and yen, with Treasuries also benefiting.
EUR/USD fell from 1.1715 to 1.1696 before sticking around 1.1705-20 levels thereafter, finding some support from large expiries around the 1.1700 handle.
The pound was also a notable mover on the session, with cable initially slumping from 1.2860 to 1.2838 before catching a broader bid to 1.2950 on Brexit hopes as UK PM Johnson is set to intervene in talks with EU president von der Leyen tomorrow.
Elsewhere, AUD/USD eased from 0.7160 to 0.7131 but is keeping closer to 0.7150-60 again now ahead of North American trading.
Major currencies are still largely taking the news in stride but a further selloff in stocks later on may yet prompt heavier risk-off flows ahead of the weekend; vice versa.
The Trump news has certainly relegated the US non-farm payrolls report to a second-tier event today but it is still one to watch in case of any major surprises.
