Sign up to create alerts for Instruments,
Economic Events and content by followed authors
Free Sign Up Already have an account? Sign In
Quotes
All Instrument Types
- All Instrument Types
- Indices
- Equities
- ETFs
- Funds
- Commodities
- Currencies
- Crypto
- Bonds
- Certificates
Please try another search
Is it finally time to sell Nvidia ahead of earnings?
Read More
Europe's Second Virus Wave Triggers Sharp FX And Equities Sell-Off
au.investing.com/analysis/europes-second-virus-wave-triggers-sharp-fx-and-equities-selloff-200439981
Europe's Second Virus Wave Triggers Sharp FX And Equities Sell-Off
By Kathy Lien | Sep 22, 2020 17:54 Currencies and equities sold off sharply on Monday as virus cases in Europe hit new record highs. Everyone’s greatest fear this summer was a second wave and, unfortunately, that fear has materialized. Spain reported 14,389 new cases on Friday, while France reported nearly 13,498 new cases Saturday. These numbers, which are far beyond the peaks set back in March, triggered a series of tighter social restrictions in Europe’s second and third largest economies. Even Germany, which has not seen a significant uptick in virus cases tightened mask and contact regulations in a bid to prevent a broader spread in Munich. In the UK, cases are below their spring peak but doubling every day, leading the country’s chief scientific adviser to warn that there could 50,000 new daily cases by mid-October if further action is not taken.
Fifty thousand cases a day is not just a risk for the UK, but all European countries experiencing spikes. The problem is that while these cases are higher than where they were in spring, the measures taken by the Spanish, French and UK governments are more localized, which raises concern about their effectiveness. Given the severity of the pandemic spread in Europe, more restrictions are on their way for these countries. Considering the economic toll caused by lockdowns in April and May, the second wave poses a significant risk for the euro and sterling. Both currencies fell sharply on Monday and we think more losses are to follow with EUR/USD targeting 1.15 and GBP/USD 1.25. Even European Central Bank President Christine Lagarde seems to be concerned as she talked about an uncertain and uneven recovery along with the availability of options if more stimulus is needed. Her most notable comment was on the euro – she previously urged investors not to overreact to its rise, but today she said they are “attentive to the euro’s appreciation,” which is a greenlight for euro’s decline. For euro and sterling, aside from virus headlines, the main focus are the PMIs. If this month’s reports show deterioration, we will see further losses in these currencies.
The U.S. dollar traded higher despite U.S. troubles. The election is nearing and with the death of Justice Ruth Bader Ginsburg, politicians are gearing up for some tough battles in Washington. There’s a lot at stake, and the political fall-out will be significant. Election uncertainty is a serious risk for equities and currencies. Even in 2016, when the polls showed Hillary Clinton in the lead, stocks trended lower in the weeks leading up to the election. At the same time, we saw a sell-off in EUR/USD and choppy trading in USD/JPY. The history of volatility will repeat itself in 2020 but in more magnified way given the strong opinions around Trump’s push for to replace her seat quickly. With no major U.S. economic reports scheduled for release this week, U.S. dollar traders should watch three things – headlines out of Washington, Fed Chairman Jerome Powell’s testimonies and equities as investors are likely to take their cue from risk appetite.
The commodity currencies also sold off, with the New Zealand dollar leading the decline. While Europe is desperate to prevent the second wave from worsening, New Zealand ended all pandemic restrictions in all parts of the country except for its largest city, Auckland. Yet, instead of rising, the currency is falling because of risk aversion and concerns about this week’s Reserve Bank meeting. When the RBNZ last met, it was open to the idea of negative rates and traders worry that while the country has pushed out COVID-19 a second time, uncertainty abroad leaves that option on the table. For Australia, the biggest problem is worsening relations with China. Apparently Australia is turning away investments from Chinese companies after China lost access to Australia’s space-tracking station. The Canadian dollar also declined, with USD/CAD rising to its strongest level in more than a month.
Related Articles
EUR/USD in Range as Trump Tariffs Meet Eurozone Uncertainty - Levels...
By Günay Caymaz - Feb 25, 2025
The German election results initially boosted optimism, but uncertainty over coalition talks is keeping pressure on EUR/USD. Trump's confirmation of tariffs on Mexico and Canada...
US Dollar Faces Further Volatility as Traders Weigh Tariff Risks, Fed...
By Francesco Pesole - Feb 25, 2025
Trump said yesterday that tariffs on Mexico and Canada are still on the table ahead of next Monday’s deadline. Markets remain reluctant to price that in for now, and some soft US...
US Dollar Stable as Fed Expresses Confidence in Consumer Resilience
By Chris Turner - Feb 20, 2025
The standout move in overnight FX markets has been the drop in USD/JPY close to 150 as traders get excited about another hike from the Bank of Japan. Expect USD/JPY to stay...
Europe's Second Virus Wave Triggers Sharp FX And Equities Sell-Off
Add Chart to Comment
Confirm Block
Are you sure you want to block %USER_NAME%?
By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.
%USER_NAME% was successfully added to your Block List
Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.
Report this comment
I feel that this comment is:
Comment flagged
Thank You!
Your report has been sent to our moderators for review
Add a Comment
We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:
Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.