Forex news from the European morning session - 28 October 2020
Headlines:
- EU's von der Leyen: Coronavirus cases will increase in the next 2-3 weeks
- US MBA mortgage applications w.e. 23 October +1.7% vs -0.6% prior
- Germany posts record 14,964 new coronavirus cases in latest update today
- Risk-off tide drags European equities to multi-month lows
- France October consumer confidence 94 vs 93 expected
- Merkel to push for schools to stay open in meeting with state premiers - report
- Is the market too complacent ahead of the election?
Markets:
- JPY leads, AUD lags on the day
- European equities lower; E-minis down 1.4%
- US 10-year yields down 0.6 bps to 0.761%
- Gold down 0.8% to $1,893.30
- WTI down 4.5% to $37.80
- Bitcoin down 2.0% to $13,347
It was a session dominated by risk flows, and the market grew more risk averse when European traders entered the fray to drive regional equities to multi-month lows.
The worsening virus situation in Europe and the anticipation of tighter restrictions being introduced by Germany and France is weighing on sentiment this morning.
Most major indices in Europe are down by over 3%, as the technical picture soured. Elsewhere, US futures were down by 0.6% initially, but extended losses as well to over 1%.
In the currencies space, things were more mixed at the start of the session but quickly turned towards siding with the risk-off mood as the dollar and yen strengthened.
EUR/USD fell from 1.1770 to 1.1730 as the track below 1.1800 continues, while GBP/USD eased from its 100-hour moving average near 1.3060 in a fall to 1.2950.
USD/JPY lingered around 104.10-30 for the most part as both currencies remain underpinned by the softer risk mood and lower bond yields during the session.
Meanwhile, AUD/USD slumped from 0.7140 to 0.7071 as sellers break below both key hourly moving averages to establish a more bearish near-term bias.
As the risk-off mood takes hold, volatility has jumped higher and that is pushing commodities lower as well with gold down by nearly 1% to near $1,890 while oil has slumped by over 4.5% to $37.75 and close to testing its 200-day moving average currently.
Amid virus concerns, just be mindful that the market may also see reason to consider risk positioning ahead of the election and don't forget about month-end flows as well.
