Forex news from the European trading session - 27 May 2020
Headlines:
- Trump threatens to regulate or close down social media platforms due to political bias
- SNB's Jordan: We have a slightly deflationary environment
- US MBA mortgage applications w.e. 22 May +2.7% vs -2.6% prior
- Italy reportedly will get €82 billion in grants under EU proposal - official
- European Commission reportedly to propose €750 billion in virus recovery fund to aid member states
- ECB's Lagarde: It is very likely that ECB 'mild' scenario is outdated
- UK's Jenrick on Cummings issue: Now is the time for us all to move on
- EU says to weigh 'robust' message to China over Hong Kong issue
- South Korea sees fresh spike in coronavirus cases amid outbreak in e-commerce warehouse
- Germany reports 362 new coronavirus cases, another 47 deaths in latest update
Markets:
- EUR leads, CHF lags on the day
- European equities higher; E-minis up 1.4%
- US 10-year yields up 3 bps to 0.725%
- Gold down 0.6% to $1,700.80
- WTI down 1.3% to $33.90
- Bitcoin up 3.0% to $9,126
The market was looking a bit more cautious at the start of the session but that changed as the European Commission reportedly proposed a bigger-than-expected recovery fund proposal to aid member states in dealing with the economic fallout from the virus outbreak.
The commission also proposed a mixture of €500 billion in grants and €250 billion in loans, helping to give risk assets an added lift after a slightly more optimistic start.
In the currencies space, that saw the dollar turn on its head and fall after having kept slight gains at the start of the session. Meanwhile, the euro firmed on the news with EUR/USD rising from 1.0950 to fresh highs since early April at 1.1030.
As the dollar fell, risk currencies gained and that saw AUD/USD move from 0.6640 to 0.6680 before paring some gains. NZD/USD is still keeping higher in a move from 0.6190 to 0.6230.
The pound is somewhat struggling though, failing to take advantage of the risk mood with cable sitting lower after a solid run higher yesterday. The pair is down slightly at 1.2315 but off earlier lows seen at around 1.2280-90 levels.
As the risk rally looks set to march on into North American trading, it will once again be a test of buyers' resolve as to whether or not they can keep a daily break in the S&P 500 above the 200-day moving average and the 3,000 level.
That is going to be the spot to watch in terms of risk sentiment.
Also, just be mindful that while the European Commission proposal here is encouraging, we'll still have to see if it can gather approvals from member states involved - especially the "frugals" - so be wary that it is not over until the fat lady sings.
