Forex news from the European trading session - 11 December 2020
Headlines:
- UK PM Johnson: It is looking very, very likely we will have a no-deal Brexit
- FDA says will rapidly work towards finalisation of Pfizer vaccine emergency use authorisation
- London mayor says that urgent action needed to avoid Tier 3 lockdown
- EU's von der Leyen: Brexit positions remain far apart on fundamental issues
- ECB policy package came close to running aground at tense meeting yesterday - report
- BOE's Bailey: Work on negative rates is still ongoing
- Brexit: von der Leyen reportedly told EU leaders that probability of no-deal is higher than that of a deal
- Brexit: von der Leyen reportedly told EU leaders that she has 'low expectations' for a deal
- German government, states to discuss new virus measures this weekend
- ECB's Villeroy: We are vigilant about euro exchange rate
- BOJ likely to extend corporate funding aid schemes - report
- Sanofi, GlaxoSmithKline announce delay in coronavirus vaccine program
- Germany sees a jump to record daily coronavirus cases alongside deadliest day of the pandemic
Markets:
- JPY leads, GBP lags on the day
- European equities lower; E-minis down 0.7%
- US 10-year yields down 1.7 bps to 0.89%
- Gold down 0.2% to $1,833.90
- WTI up 0.1% to $46.85
- Bitcoin down 2.5% to $17,897
It was a session largely dominated by Brexit angst as the pound fell to fresh lows in nearly a month against the dollar, with cable sliding from 1.3320 to 1.3170.
EU chief von der Leyen reaffirmed that a no-deal outcome is now more likely and that set the tone as we start to head towards the weekend, with long positions in the quid being shaken out. EUR/GBP also rose to a two-month high above 0.9200.
Amid the prospects of a no-deal Brexit and US stimulus stalemate, risk aversion resurfaced and that pinned equities lower with European bonds surging ahead as well.
On the latter, Spanish 10-year bond yields turned negative for the first time ever and that bolsters the ongoing theme of rising negative-yielding debt in the market.
European stocks opened lower before sliding to near one-month lows while US futures declined by nearly 1% from flat levels seen at the start of the session.
The dollar and yen kept firmer as such, with EUR/USD falling from 1.2160 to 1.2110 but kept a defense of its 100-hour moving average.
AUD/USD also erased earlier gains from 0.7570 to 0.7530 while USD/CAD moved up from 1.2720 to 1.2780 and is keeping just below that now.
Looking at the factors weighing the market down, there really isn't anything too new as these are the same issues that have been plaguing the market since November.
Of course, the timing and focus of things are different now but I would argue the retreat this week can also be attributed to a bit of a pause in the risk rally ahead of the year-end; positioning flows to also have an impact or should be part of the consideration.
In any case, Monday promises to be a big day for the pound regardless and it should have some spillover impact to risk trades as well. So, let's see how that turns out.
