Forex news from the European trading session - 20 September 2021
Headlines:
- ECB's Kazaks: Support beyond PEPP will be necessary
- ECB's Schnabel: As inflation outlook brightens, when asset purchases end is more important
- China curveball ahead of the Fed this week?
- UK considers offering state-backed loans to energy firms amid soar in gas prices - report
- China risks at the front of it all to start the week
- Germany August PPI +1.5% vs +0.8% m/m expected
- NZ PM Ardern: Auckland lockdown to be eased starting from midnight Tuesday
Markets:
- JPY leads, CAD lags on the day
- European equities lower; S&P 500 futures down 1.6%
- US 10-year yields down 4.6 bps to 1.324%
- Gold up 0.2% to $1,757.00
- WTI down 1.9% to $70.63
- Bitcoin down 6.2% to $44,055
The market is waking up to risks on Evergrande and China and it isn't looking pretty.
Risk sentiment took a knock in Asia Pacific trading as property stocks in the Hang Seng crumbled, with broad pressures emanating elsewhere to the likes of materials and financials as well - carrying over to Europe.
That is seeing equities pressured since the start of the day, with European indices down by over 2% and S&P 500 futures extending its decline from 0.7% to 1.6% on the session.
The defensive mood is weighing on commodity currencies and is bolstering the likes of the yen, franc and dollar in European morning trade.
EUR/USD is weighed down slightly from 1.1715 to 1.1700 while USD/JPY crept lower from 109.90 to 109.50. GBP/USD also fell to fresh lows in nearly a month, slipping below 1.3700 to 1.3660-70 levels currently.
Meanwhile, USD/CAD moved up from 1.2790 to 1.2855 and is holding near the highs for the day now as risk sentiment remains more sour. Oil prices being down by over 2% on the day also isn't quite helping with loonie sentiment.
Looking over to the antipodeans, AUD/USD is down 0.5% to 0.7227 and NZD/USD down 0.4% to 0.7012 - both keeping near the lows for the day as well.
Elsewhere, 10-year Treasury yields are also undoing the Friday move in a nearly 5 bps fall close to 1.32%, as market participants seek a flight to safety amid the anxiety and angst.
It's all about risk sentiment at the moment and the fear is that things could yet get uglier with the fallout from Evergrande/China running deeper during the week.
This is definitely not going to be your typical Fed week.
