Forex news wrap for North American session on December 21, 2020.
- Broad indices close lower but well off the worst levels of the day
- The market is sending a loud message that the only thing that matters is the vaccine
- Crude oil futures settle at $47.74
- US sells 20-year notes at 1.470% vs 1.478% WI
- Boris Johnson: Only human-handled freight is being held up
- Maj. European indices end the day with sharp declines
- UK new virus cases up 33,364 vs 7-day average of 27,249
- Major US indices open lower but rebounding in early trading
- Mnuchin: We couldn't be please that we got this deal done in time
- Canada Nov new housing price index +0.6% vs +0.8% prior
- US Nov Chicago Fed national activity index +0.27 vs +1.01 prior
- PM Johnson to hold a press conference later today
- The USD is the strongest and the GBP is the weakest as NA traders enter for the day
Looking at other markets:
- Spot gold is down -$4.58 or -0.24% at $1876.77
- Spot silver is up $0.38 or 1.49% at $26.19
- WTI crude oil are down -$1.36 or -$2.77 at $47.74
- Bitcoin on Coinbase is trading down -$255 at $23112.
The US session started with the USD as the strongest of the majors with gains of 1.72% vs the GBP, 1.35% vs the NZD and 1.29% vs the AUD leading the way. The greenback was higher vs the other pairs as well (from 0.25% to 0.70%). The catalyst was fears of new strand of Covid leading to lower growth down the road and more restrictions. London was put on lockdown and EU countries closed the border between the mainland and the UK. In the US, the US lawmakers did agree on a $900B stimulus deal (with $600 stimulus checks going out soon), but flows were still out of the riskier currencies and into the relative safety of the USD.
The GBP is ending the session as the weakest on Covid and Brexit, but like the USD, is ending down but well off the lows for the day. A headline that PM Johnson was making a last ditch effort on the fisheries stalemate, helped to spike the GBPUSD sharply higher in early afternoon trading. The GBPUSD had an oversized 300 pip trading day that saw the pair gap lower in the Asian session, move down around -325 pips from the closing level, only to rebound over 300 pips from the low before settling at 1.3463 - just below the 100 hour MA at 1.34793. The other GBP pairs had similar volatile price swings today with prospects likely continuing as it remains an epicenter with Covid cases rising, lockdowns and Brexit all converging at the same time.
At the end of the day, the dollar remains the strongest but well off the highs. Versus the GBP, the pair is up 0.66%, vs the NZD the gain is 0.52% and the AUS 0.50%. Concerns started to fade and the markets seemed to put the money on the vaccine positive (and new Covid stimulus) over the Covid negatives.
So although the dollar is higher, the NY session saw the dollar reverse lower and well off the high levels.
The fall was matched by a rebound in US stocks. The US stocks opened lower and fell more in the early morning trading. The S&P was down close to 2%, the Nasdaq was down -1.8% and the Dow was down around -1.4% at session lows. Then the buying returned. For the S&P it was helped by the index bouncing off its 200 hour MA and near a midpoint retracement level near the session lows. That helped to lift the major indices back toward unchanged and although the broader S&P and Nasdaq closed lower (by -0.39% and -0.10% respectively), the rebound was certainly much more palatable to digest (PS the Dow eked out a gain of 0.12% on the day).
In the US debt market, the yields - like stocks - started the day lower on flight to safety flows. The 10 year reached a low of 0.88% but is closing at 0.933% or down -1.3 basis points. The 30 year was at 1.618% but is ending the day at 1.669%, down -2.3 basis points.