Forex news from the European morning session - 26 February 2020
Headlines:
- ECB's Makhlouf: ECB will consider various options for inflation target
- Italy new coronavirus cases rise to 374 vs 322 on Tuesday
- US futures pare earlier losses, mixed signals in the market
- 10-year Treasury yields turn around, back at flat levels
- ECB's Holzmann: ECB had 'heated' debate on inflation target last week
- France confirms 3 more new coronavirus cases, Iran confirms another 44 cases
- It is getting ugly in Europe as risk rout intensifies
- Risk aversion begins to creep into the market again
- South Korea confirms 115 more new coronavirus cases, brings total to 1,261 cases
Markets:
- CHF leads, GBP lags on the day
- European equities lower; E-minis up 0.2%
- US 10-year yields up 1.7 bps to 1.369%
- Gold up 0.6% to $1,645.35
- WTI down 1.4% to $49.19
- Bitcoin down 3.5% to $9,050
After two days of heavy risk aversion, the European morning began with more calm before quickly settling into a more risk-off mood once again.
European indices were already marked lower in playing catch up to overnight losses in US stocks but the rout intensified as safety flows emerged in early trades.
The DAX saw losses of near 1% turn quickly into more than 3% as US futures also tumbled into negative territory, falling by over 1% on the session. At the same time, US 10-year yields threatened fresh lows at 1.31% and that gave gold and the yen a brief lift.
Gold moved up from $1,648 to $1,655 while USD/JPY eased from 110.45 to 110.13. Oil also fell back below $50 but apart from that, movement in the currencies space was mild.
But as the risk rout overextended, things quickly turned around with Treasury yields the first to turn flat before US futures did the same alongside European stocks.
That saw gold ease a little with USD/JPY rising back to 111.50-60 currently.
The pound was the biggest loser in the currencies space as EUR/GBP hit a two-week high amid month-end flows. Meanwhile, cable gradually eased from 1.2980 to 1.2925-40 levels.
Looking ahead, North American traders will have a debate to settle as to whether the risk rout still has room to extend or is there scope for a pause/pullback in the mean time.
