US Markets

BUZZ-COMMENT-US recap: EUR/USD loosens grip on gains as safe-haven dollar bounces

Credit: REUTERS/PHILIPPE WOJAZER

The safe-haven dollar and yen slowly clawed back much of their losses on Monday against the risk-sensitive euro and sterling [nL1N2HA0S0], as stock market losses diminished investors' resilience to political and pandemic uncertainty.

Oct 19 (Reuters) - The safe-haven dollar and yen slowly clawed back much of their losses on Monday against the risk-sensitive euro and sterling , as stock market losses diminished investors' resilience to political and pandemic uncertainty.

For much of the session, solid Chinese data reinforced the notion that the world's second-largest economy was again leading a global recovery , coming as it did after Friday's unexpectedly strong U.S. retail sales report .

The data bolstered risk sentiment, but uncertainty over Washington's ability to deliver pandemic relief before the Nov. 3 U.S. election eroded investor confidence.

Risk aversion and repatriation into the dollar versus the euro and pound could accelerate if the pandemic becomes even more disruptive in Europe and EU-UK trade talks fail to overcome political brinkmanship and deliver a deal before year-end .

EUR/USD rebounded almost to its 55-day moving average at 1.1796. Early gains came as stock markets rose and the haven dollar was sold, but U.S. stocks were offered pretty much from the New York open, stalling EUR/USD's advance .

ECB Governor Christine Lagarde argued for accelerating disbursement of the EU recovery funds in 2021 and keeping mutualised fiscal measures in the EU tool box , to which Bundesbank President Jens Weidmann said joint borrowing should be a one-off response to the pandemic shock .

The 750 billion euro relief fund has yet to be approved by EU lawmakers .

Sterling initially shrugged off dismissive comments about trade talks with the EU from UK cabinet office minister Michael Gove, but later succumbed as stocks retreated.

Sterling's intraday rally, in line with other reflation trades, had already run into resistance from the 55-day moving average by the time the trade talk headlines trimmed bids for the pound .

USD/JPY traded in a tight range below resistance at 105.50/58 .

High-beta currencies such as the Australian dollar were assisted by the early reflation flows and USD/CNH probing its 2019 6.6710 low.

Metals rose in line with the weaker dollar, while oil remained in a holding pattern near $40/bbl due to demand doubts linked to the pandemic and green initiatives.

The Fed's Beige Book report on Wednesday is the next meaningful scheduled event risk before Thursday's claims and presidential debate. The Fed is seen on hold until December.

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(Editing by Burton Frierson Randolph Donney is a Reuters market analyst. The views expressed are his own.)

((Randolph.donney@thomsonreuters.com))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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