After four days of solid gains, during which the euro gained more than 3.5% against the dollar, the single currency is on the backfoot today and is down slightly against not only the greenback but also versus all other major currencies. Euro weakness can, at least to some degree, be explained by disappointment following yesterday’s EU summit. European leaders failed to reach an agreement on the issuance of the so-called ‘corona bonds,’ which in essence are a pan-European bond where all members of the single currency share the risk. Germany and Holland refused to step in and share the risk with their less well-off partners in the south of the continent. This lack of solidarity between north and south, rich and poor, is undermining the single currency as another eurozone crisis now looms on the horizon, with echoes of 2012. The spread between German and Italian bonds continues to increase, in a development apparently faced with some indifference by Northern European countries.
Ricardo Evangelista – Senior Analyst, ActivTrades
Gold seems to have found some stability after the liquidity collapse seen earlier this week and the price is reflecting this, with bullion moving between $1,595 and $1,640 while waiting for new directional signals. Volatility remains high but is lower than the levels seen last week. Markets are likely to price in the huge increase in liquidity which is going to be flooded into circulation by central banks to tackle this crisis and could represent a supportive element for the gold price.
On a separate note, we should also mention that logistical problems with physical deliveries will continue as the virus has interrupted the supply chain and this is something that suppliers won’t be able to resolve quickly.
Carlo Alberto De Casa – Chief analyst, ActivTrades
Friday saw most European benchmarks consolidate following a solid three day rally. The market sentiment remains alive today, thanks to the global support measures taken in almost every region. However, investors around the world may be tempted to take some profits before the weekend. The spread of the virus doesn’t seem to be slowing down and has even accelerated strongly in the US during the last few days. The nation recently overtook China in terms of number of cases, following a surge in New York and the situation is likely to continue to weigh on investors’ risk appetite the longer no peak or curve inversion appears in sight in critical zones such as the US or western Europe. Today’s trading is expected to remain volatile but lacking a clear direction. No major data release is due today and many traders are already looking ahead to next week’s developments on Europe’s strategy to contain the impact of the virus after leaders failed to reach a concrete plan yesterday. The Stoxx-600 Index is trading slightly lower with the price weighed down by the banking and mining sectors. The FTSE-MIB Index from Milan as well as the German DAX-30 are among the most resilient markets today with prices still consolidating inside a tight trading range. The DAX-30 Index is still trading above 9,745pts but recently failed to clear the 10,050pts zone. A fall through the lower band of the bullish channel may lead prices down towards the lower support levels at 9,440pts and 9,300pts.
Pierre Veyret– Technical analyst, ActivTrades
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