Wednesday, December 11th, 2019

Dow Plunges, Taking With It EURUSD

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A global equities rout is hampering any real gains in the FX markets as we head into the new York afternoon close.  With concern now at a high on fears of a weaker worldwide economy, stock markets around the world are looking to end the session in the red.

European equity markets turned lower following the ECB interest rate announcement this morning – with major losses felt in Germany, France and the UK.  The main benchmark indexes for the three countries declined by an average of 3.7% on the day.  These results are in line with US stock markets – as the Dow Jones Industrial Average is looking to close lower by about 462 points or 3.9% on the day.

And the stock markets aren’t the only things turning lower.

Major and higher beta (or riskier) currencies are also being dragged down.  Although the EURUSD was relatively stable for most of the session, the risk averse sentiment has dragged the single currency lower against the dollar – by about 200 pips to 1.4123.

So, what to expect in the overnight?

Further losses – with focus on EUR, GBP and AUD – are anticipated to linger on through the Asian session.  It is important to note that declines are not only being felt in 1 market, but all major markets.  This across the board risk aversion towards risky assets (commodities, major currencies and stocks) makes the case for further downward pressure in the next session – only to be worsened by thinner volumes and a lack of economic releases.

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