Mild risk on in EU
UK Retail Sales rebound
Nikkei 0.55% Dax 0.64%
UST 10Y 0.72
Oil $40/bbl
Gold $1728/oz
BTCUSD $9329
Asia and the EU
No data
North America Open
CAD Retail Sales 8:30
It’s been a quiet night of trade in both equities and FX which has been emblematic of this whole week as volatility continues to compress. Stock index futures remained bid with Nasdaq hovering near all-time highs but price action has been sluggish as equity investors were content to tread water.
With no major economic data on the calendar, the trade flows today may be driven by technical and political factors. In the US, the focus will be on the quadruple witching hour which sees futures and options expire today and could cause some swings in the underlying indices as traders try to settle their bets on derivatives.
Little fresh news is expected out of Washington DC, although Trump’s latest saber-rattling on China may add a bit to volatility if he takes to Twitter in the afternoon.
The big political focus will be on the EU summit today although market expectations for any meaningful progress are almost nil as most of the action is expected to be a mere formality today with real negotiations to start next week.
While markets are anticipating a few headlines the price pressure on EURUSD has clearly been evident this week. As many other analysts have pointed out the pair has been making a series of lower highs as some of the enthusiasm over the fiscal rescue package begins to dissipate. The key stumbling block is the issue of grants versus loans to the Southern European economies which have been badly hurt by COVID-19 with smaller Northern European nations resisting the deal.
If this truly turns into an impasse the negative impact on EURUSD and the EU economy could be severe. For now, the market is clearly pricing in a positive resolution with EU approving some variant of 750B EUR stimulus by July, but if there is no agreement by then the pressure on capital markets which as eased markedly over the past month will escalate once again with EURUSD quickly retreating below 1.1000.
