Forex news from the European trading session - 21 December 2020
Headlines:
- UK December CBI retailing reported sales -3 vs 0 expected
- Risk tumbles further on the session, DAX down 4%
- Ireland's Coveney: Brexit deal can be done in the next few days
- SNB total sight deposits w.e. 18 December CHF 705.0 bn vs CHF 704.9 bn
- Irish transport minister says that 48-hour UK travel ban likely to be extended
- EMA reportedly expected to approve use of Pfizer vaccine today
- UK news recap: A rough start to the week for the pound
- Hong Kong to ban UK flights starting from Tuesday, 22 December 2020
- Germany reports 16,643 new coronavirus cases in latest update today
Markets:
- USD leads, GBP lags on the day
- European equities lower; E-minis down 1.7%
- US 10-year yields down 4.8 bps to 0.898%
- Gold flat at $1,881.41
- WTI down 3.5% to $47.35
- Bitcoin down 2.7% to $22,210
As Christmas week trading gets underway, the market isn't quite in a merry mood as a wave of risk aversion sweeps across European trading this morning.
A new strain of the coronavirus in the UK prompted tighter lockdown measures and also many European countries to ban travel from the UK itself, causing some chaos with supply chains and freight/shipments of goods over the weekend.
That saw European equities tumble heavily after a sharp decline at the open, with the DAX extending losses from 2% to 4% before a modest pullback.
S&P 500 futures also fell from 0.2% to as deep as 2.5% at one point.
Adding to that is the continued angst from Brexit talks as it goes unresolved for yet another week, leaving the EU with no time to ratify any agreement before the year ends.
That caused a double whammy for cable as the pound got hammered on Brexit and virus woes, while the dollar strengthened on a big pullback in the market following the smashing that the greenback has undergone in recent weeks since November.
At one point, cable fell by over 300 pips - its most since March - from 1.3350 to 1.3188 during the session before recovering back up to 1.3260-80 levels currently.
Meanwhile, EUR/GBP also pushed up to test 0.9200 before meeting some key daily resistance and is keeping under the figure level now.
The risk retreat saw the dollar strengthen across the board, pushing gains by the most since March for a brief period, with AUD/USD falling by nearly 2% in a drop from 0.7560 to 0.7462 in European morning trade.
NZD/USD also fell all the way to 0.7003 while USD/CAD pushed above 1.2900 to 1.2957 before a slight pullback in dollar gains for the day now.
Elsewhere, gold also saw its advance trimmed from $1,900 near its 100-day moving average at $1,904 to flat levels now. Silver also erased over 5% gains above $27 to just under $26 momentarily before recouping near 2% gains currently.
As we get stuck into the new week, just be aware of year-end trading conditions prompting some readjustments and liquidity may not necessarily be what it is this week.
I'll just leave this as a reminder to everyone on how the dollar has performed since November up until last week as to why consensus trades can be dangerous at times, leaving the scope for violent and sharp pullbacks as what we are seeing today.
Even more so during a time like this i.e. year-end coupled with "convenient" news/headlines as well as some reason for the risk rally to also meet a pause.
