The waiting game has begun. Trading remained technical in nature today as markets await key central bank meetings, including the Fed and the Bank of England on Thursday, as well as important data (payrolls on Friday) and of course the all-important US elections tomorrow (night). All could have a major impact on markets in theory but that doesn’t stop investors from taking a bullish approach at the start of the week. European stock gains gradually built to amount up to 2% currently after two days of muddling through. The EuroStoxx50 tentatively retakes first resistance (previous support) at 3012.5 (38.2% Fibo retracement March low – July recovery high). US equities open with gains of about 1%+. Oil prices slumped more than 5% during Asian dealings (Libya boosting oil production amid lockdown-driven faltering demand) but staged an impressive intraday comeback. Core bonds fluctuated with US Treasuries outperforming the German Bund for a change in a session which is as atypical as Friday’s (when US yields soared amid falling stocks). US yield declines vary from 2.4bp (5-yr) over 3.9 bps (10-yr) to 4.2bps (30-yr), undoing much of Friday’s steepening. The German Bund gapped higher at opening but forfeited gains quite soon. German yields are basically unchanged. Peripheral spreads narrow in Greece (-2 bps) and tighten slightly in Italy (+1 bp).
The dollar traded a bit choppy. Overnight dollar gains faded as risk momentum built in the midst of the European session. Trading dynamics changed again in favor of the USD as first US investors joined. The trade-weighted dollar (DXY) was about to lose the 94 resistance mark it conquered as recently as this morning but it proved nothing more than a test. DXY is trading at 94.11 at the time of writing. USD/JPY eyed 105 this morning but had to throw in the towel. The pair is filling bids in the 104.74area. EUR/USD had a rough morning but the 1.1612 support area held. The pair even rebounded slightly to the 1.165 but eurobulls lack motivation even as other, riskier European assets perform very well. At 1.163 currently, EUR/USD remains in the technical danger zone. The common currency also fails to profit against the yen, even as risk-on dominates. EUR/JPY remains below 122 after dipping below last Friday. Turning to sterling, it initially looked that PM Johnson announcing a new nationwide lockdown would prevent the currency from rising on a possible breakthrough in the Brexit process. EUR/GBP went north towards 0.905 before taking it down a notch. EUR/GBP 0.90(1) acts as support for the moment though.
The Turkish Lira set new all-time record low levels against the euro and the dollar, currently trading near USD/TRY 8.4375 and EUR/TRY 9.825 respectively. The further decline of the lira occurred even as the Central Bank of Turkey took some technical measures to tighten money supply. It announced banks’ borrowing limits at CBRT interbank money market to be reduced to zero and also suspends overnight repo-transactions via the quotation method against lira-denominated sukuks. Both measures raise the cost of funding for banks, but for now they are not able to stop the decline of the lira.
This morning oil spiked sharply lower at the start in Asia this morning as markets pondered the impact of new lockdown measures on global demand for oil. However, a big part of the decline was undone during the day. A better risk sentiment supported the rebound. There were also rumors that Russia was discussing the option of delaying an easing of OPEC+ output reductions scheduled for early next year by three months Even so, the Russian ruble remains under pressure, with the USD/RUB cross rate trading north of 80.