Futures Crater On Mutant Virus Panic, Energy Tumbles On UK Quarantine

  • DXY - Cable collapse aside, the Dollar is also benefiting from broader demand on safe-haven grounds as risk sentiment sours markedly on heightened fears over COVID-19 contagion and the fallout from no Brexit deal that will counter some of the positivity or relief if US fiscal stimulus is finally delivered later today. Hence, the index has rebounded firmly from recent deep lows to establish a considerably firmer base on the 90.000 handle and revisit 90.500+ between 90.187-91.022 parameters vs 89.723 last week.
  • NZD/AUD/CAD - No surprise to see the high beta currencies suffer most after the pro-cyclical Pound as the Kiwi and Aussie recoil towards or just beneath 0.7000 and 0.7500 respectively, while the Loonie is trying to contain losses near 1.2900 against the backdrop of plunging crude prices. Back down under, the Aud also has pandemic issues of its own to contend with given the outbreak in Sydney that has resulted in a return to more stringent measures.
  • JPY/EUR/CHF - Even the Yen is yielding to Greenback advances, albeit also wary perhaps that Japanese PM Suga has apparently drawn a line in the sand at 100.00 after rolling out a supplementary budget, as Usd/Jpy trades close to the upper end of a 103.25-85 band. Elsewhere, the Euro is eyeing any stops below 1.2130 after triggering enough at 1.2164 to take out the 10 DMA (1.2160) and the Franc is holding around 0.8900 following mixed Swiss sight deposit balances post-SNB and the US Treasury designating the country as a currency manipulator.
  • SCANDI/EM - Not much solace for the Nok via Norges Bank Governor Olsen downplaying the likelihood of reverting to NIRP as the aforementioned reversal in oil along with increasingly bearish risk undermines the Crown more than the Sek, while EMs are floundering across the board and even GOLD is underperforming having had a brief look above Usd 1900/oz..

In commodities, WTI and Brent have succumbed to the drop in broader sentiment this morning given negative COVID-19 developments out of the UK and the associated impact on demand via travel and other components alongside the undertone of no breakthrough in Brexit discussions. Currently, WTI and Brent are lower by over 5.0% with the benchmarks having moved below the USD 47/bbl and USD 50/bbl marks respectively in European hours; in a continuation of APAC performance. The aforementioned negative factors have served to overshadow, thus far at least, US fiscal progress with the US House rules committee to meet from 13:00GMT/08:00 to begin preparation for a vote (timing TBC). Returning to the crude complex and as Brent has dropped below the USD 50/bbl mark, a figure it only recently reclaimed on the 10th of December, if the pressure exacerbates throughout the day participants will be mindful of the 50-DMA at USD 44.98/bbl before the 100-DMA at USD 44.05/bbl. Fundamentally, newsflow explicitly for the complex has been sparse in European hours but overnight/weekend we did see updates from Saudi’s Energy Minister that themselves and Russia are on the same page regarding market management alongside renewed tensions around Iran after the US Secretary of State attributed rocket attacks in Baghdad to the nation. Moving away from crude and to metals spot gold has, in-spite of the broader tone, not received much in the way of haven-allure with the precious metal down by just shy of USD 10/oz at present compare to earlier losses of as much as USD 25/oz. Such downside is in-light of the USD’s performance with the DXY in proximity to highs ~91.00 largely because of GBP being significantly hampered regarding Brexit and COVID-19 updates in the region.

US Event Calendar

  • 8:30am: Chicago Fed Nat Activity Index, prior 0.8
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