Forex news from the European trading session - 28 August 2020
Headlines:
- Fed's Mester: Economic activity is slowing in some regions
- Germany's Merkel calls for citizens to take coronavirus pandemic seriously
- BOJ reaffirms that it will maintain current monetary policy even as Abe resigns
- USD/JPY falls by 1% in drop below post-Powell low
- Eurozone August final consumer confidence -14.7 vs -14.7 prelim
- ECB's Villeroy: A credible, symmetrical inflation target is key
- Japan's Abe: I have decided to step down as prime minister
- France August preliminary CPI +0.2% vs +0.1% y/y expected
- Nikkei tumbles on report that Abe may resign as Japanese prime minister
- Japan prime minister Shinzo Abe reportedly plans to resign due to health reasons
- South Korea announces restrictions to operations of restaurants, cafes in Seoul
- Germany reports 1,571 new coronavirus cases in latest update today
Markets:
- JPY leads, USD lags on the day
- European equities mixed; E-minis up ~0.3%
- US 10-year yields down 0.6 bps to 0.745%
- Gold up 1.7% to $1,962.00
- WTI flat at $43.05
- Bitcoin up 1.6% to $11,450
The big story of the session was the surprise resignation of Shinzo Abe as Japanese prime minister. Up until earlier, it was expected that he would address the public on his health concerns and carry on with the post.
But today marks the end of an era in Japanese politics as Abe steps down since taking over as prime minister - the longest-serving one in Japan - back in 2006.
The news triggered a risk-off spin in Japanese markets and that lid a fire under the yen as the currency turned early losses into more sustained gains on the session.
USD/JPY dipped from 106.70 to 106.10 initially but a follow through wave of selling - helped by dollar weakness - sees the pair tumble to 105.30 levels currently.
Stocks traded more mixed in general but Treasury yields saw a reversal with 10-year yields having been up by 3 bps to 0.786% earlier, before falling to 0.745% now.
The dollar's woes are also not helped by likely month-end rebalancing flows as the greenback gets battered across the board.
EUR/USD moved up from 1.1860 to 1.1920 while GBP/USD made fresh eight-month highs in a push above 1.3300. USD/CAD continues to sink to fresh seven-month lows near 1.3050 while AUD/USD is at its highest since December 2018 in a push above 0.7300.
The market is still largely digesting the Fed event from yesterday and for now, the verdict appears to be a clear run lower for the dollar as it continues to languish with little technical support to help out the currency at the moment.