The US dollar index jumped in Asia after hitting the 96-support, as the US 10-year yield retreated to 0.70% on the back of a swift move to safety. The USDJPY slumped below 107.00, as the Swiss franc traded at its strongest level since March as investors moved capital towards safe-haven currencies.
Gold remained bid above $1700 per oz, but the upside potential remained limited as investors demand more evidence of a sizeable market rout to carry the gold rally toward the $1800 mark.
WTI crude remained offered below $40 per barrel on rising anxiety of a renewed surge in Covid-19 cases and the unexpected rise in US oil inventories last week.
The EURUSD advanced to 1.1422 on Wednesday, but an important deterioration in global risk sentiment may rise the USD appetite and hinder the euro’s rally near the 1.15 mark. Today’s Eurogroup meeting will give an opportunity to European nations to express their view on the European Council’s latest proposal of 750-billion-euro recovery plan. While there is a risk of opposition from the ‘Frugal Five’, European leaders are expected to agree on a rescue package of at least 500 billion euro as proposed earlier by Germany and France, to give a boost to the slaughtered European economy. If this is the case, Europe will be a step closer to materializing a sizeable fiscal boost, which should rise the hope of a softer post-Covid recession and improve the sentiment in euro. If the proposal hits a strong opposition however, the euro will likely give back its recent gains.
The sterling’s advance above the 200-day moving average (1.2730) against the greenback has certainly given an opportunity for easy returns to top sellers. The GBPUSD bounced determinedly lower after trading above the 1.28 mark. We expect a deeper downside correction towards the 100-day moving average (1.2475).
By Ipek Ozkardeskaya
