Forexlive Nth American FX News 26 Nov

Risk off reigns

Black Friday sale hits the markets. Did you grab a bargain?

Risk off reigns

The session begun with a clear risk off footing. However, the initial early European risk off frenzy had slowed significantly by the time the session begun. At this stage it is hard to really read too much into these risk off moves as the new variant has been known for a couple of days prior to the sell off. The selling on the back of Thanksgiving low liquid markets makes this a slightly suspect drop which is a point I made about exacerbated moves to Reuters Carolyn Cohn this morning.

The session saw a steady trickle of Covid variant news which just kept the risk off market all the way into the weekend. The dollar kept moving lower as it is being driven by the falling yields right now as explained here. However, we also had some comments from a SA scientist who said that we have every indication that vaccines are still preventing severe COVID-19 deaths from variant. This is really good and a reminder that this risk off mood can disappear as quickly as it appeared if the vaccine is still effective against the variant. We have no evidence that it isn’t. This is some anecdotal evidence that it is. More data to come, so watch this space.

On the UK -EU tensions front UK’s Frost said that the UK is ready to use Article 16 as the gap between the EU and the UK is still ‘significant’. Same old, same old so the market did not even blink at this.  There was a whole range of heavy selling across equities. Oil was also hammered and down over 12% on the day

FTSE-3.7 %Euro Stoxx -3.7%Dax -4.2%CAC -4.9%S&P500 unofficially down -2.0%Europe’s Stoxx 600 sees worse day sine June 2020
Dow saw the biggest one day drop since Oct 28, 2020
Nasdaq closes with biggest one day drop since Sep 28

Is the variant vaccine resistant? Is it more highly transmissible? Is it more or less deadly than the delta variant? With so many unknowns there is enough to be worried, but not enough information for either relief or total fear. As a result we are left with a cautious market heading into the weekend that just wants to be rid of risk. There will be a rapid reassessment next week, and watch out for a turnaround Tuesday. NZDJPY is at a great place if this latest risk off move turns out to be a false alarm. See to the outlook for both the NZDUSD and NZDJPY on a more hawkish RBNZ who are set on a hiking cycle.

Been a pleasure everyone, take care.