- The US dollar has fallen in price across the entire spectrum of the market.
- The dollar ignored the rise in US Treasury yields.
- The yield on 10-year US Treasury bonds increased to 1.67% per annum.
- The euro was trading higher against the dollar, but lower against the pound.
- Jens Weidmann, Member of the Governing Council of the European Central Bank (ECB) and President of the Bundesbank, will step down by the end of the year.
- The Briton temporarily slipped to 1.3741 amid slowing inflation in the UK.
- Corporate earnings reporting for the 3rd quarter supported the US stock market and risky assets.
- The price of gold was understood to be above $ 1,780 per troy ounce.
- Evergrande's failure to close an asset sale affects risk appetite.
On Wednesday, October 20, following the auction, the euro gained 0.15% to 1.1651. During the American session, the EUR / USD pair recouped intraday losses, taking advantage of the dollar's weakness and increased risk appetite.
The dollar came under pressure amid positive investor sentiment in the financial markets, which was largely due to the publication of positive corporate earnings reports for the 3rd quarter.
The rise in the yield on 10-year US bonds did not help the dollar, as market participants expect a tightening of monetary policy not only from the US Federal Reserve, but also from other central banks. Accordingly, bond yields are also growing in these countries, supporting the strengthening of national currencies.
The Briton sank to 1.3741. The main reason for its weakening was inflation data in the UK, which fell short of forecasts. Investors believed the data would prevent the Bank of England from raising rates and boosting sales. The pair found support by taking advantage of the weakening US dollar.
The euro was further under pressure from the news that Jens Weidmann, member of the governing council of the European Central Bank (ECB) and president of the Bundesbank, will step down before the end of the year. Following the trading session, the EUR / USD pair closed at 1.1651. Precious metals and oil rose in price.
Scheduled statistics (GMT +3):
- At 13:00, the UK is to publish the CBI Industrial Order Volume Index for October.
- At 15:30, Canada will release a report on changes in the number of employees (excluding agriculture) according to ADP data for September. The US will present its manufacturing index according to the Philadelphia Federal Reserve Bank for October, the number of initial jobless claims on October 8-15.
- At 17:00, in the eurozone will be released consumer confidence index for October. The US is to publish the Conference Board's September Leading Indicators Index; September Existing Home Sales.
- At 22:00, RBA Governor Philip Lowe will deliver a speech.
Current situation:
At the time of writing this review, major currencies are trading in a slight minus. The Australian dollar and the Canadian dollar are losing the most. They interrupted gains against the dollar as Asian indices and US stock futures declined.
US stock indices approached historic highs. Buyers' activity may decrease as someone wants to take profits. Strong corporate earnings for the third quarter are helping investors overcome some doubts about the impact of the delta variant of the coronavirus, supply chain disruptions and the Fed's likely decision to start cutting QE.
China Evergrande pulled back on Wednesday to sell a stake in a subsidiary for $ 2.6 billion and that it has made no progress on other sales. A 30-day grace period expires on weekends. If the payments do not go through, you will have to declare a default.
The company's shares fell 10% at the opening of trading in Hong Kong. Bidding on them has been suspended since October 4. Competing developers pay interest. Chinese officials assure that everything is under control.
Technical analysis:
The euro is worth 1.1655. The dumb plunge changed the intraday technical picture, but the uptrend from 1.1525 persists. If Europe refuses to buy the euro, then at the "double top" price should be expected to return to the level of 1.1620. For buyers, the target remains at 1.1690. It would be nice if the euro hit the 1.1670 high before the American session.
Here you also need to monitor the dynamics of the EUR / GBP cross-rate. He is not in the best shape and can let buyers down when paired with the dollar. Investors expect the Bank of England to raise rates, so the euro is in a weak position with it. For the technical picture to change, the price needs to return to the 0.8463 level. So, against the background of a weakening dollar and a fall in the cross, the British could renew the maximum and go to 1.3870.
Summary: on Wednesday, the euro closed with growth. Corporate earnings reporting for the 3rd quarter supported the US stock market and risky assets. At the auctions in Asia, the euro is trading slightly higher. The situation with Evergrande adds uncertainty to the market. The company is ending its grace period over the weekend, and investors still haven't received interest. For buyers, the target remains at 1.1690.