European Open: Risk-on stocks rally hits a speed bump


Is it really so good?

European indices look set for a negative open this morning as the two-day risk rally appears to have run out of steam. The number of reported coronavirus cases globally continues to rise, though again the majority are localized in mainland China. First reports of person-to-person transmission outside of China probably took the edge off risk appetite, to the benefit of gold, the Japanese yen and the US dollar.

US indices have fallen between 0.24% and 0.29% so far today and the Germany30 index is down 0.21% on the day. We are approaching the time when the 14-day isolation period in China from the first lockdown will mature, and markets are monitoring reported totals with an eagle eye. If the escalation doesn’t slow in the next few days, then risk aversion will come to the fore.


SNB hints at rate cut?

Swiss National Bank chief Jordan has said that the Swiss franc is “highly valued” (does that mean overvalued?) but added that the central bank has no intention of weakening the local currency to gain an advantage. He did say that there was scope to cut rates further. The next policy meeting of the SNB is not until March 19 and the benchmark rate is currently at -0.75%.

The Swiss franc has been on a weakening path against the US dollar for the past two days, rebounding strongly from near three-week lows. The next technical resistance points could be the 38.2% Fibonacci retracement of the November-January drop at 0.9770 while the 55-day moving average is at 0.9787.


USD/CHF Daily Chart

Source: OANDA fxTrade


Trump says tariff war worked

In his State of the Union broadcast, US President Trump said his tariff strategy against China had worked, saying that companies are seen returning to the US. He urged bipartisan legislation to cut drug prices while price transparency would reduce healthcare costs.

The address wasn’t without “drama”, with Trump refusing to shake Nancy Pelosi’s hand at the outset, and she subsequently tore up his speech at the end. Impeachment wasn’t mentioned during the address.


RBA’s Lowe sits on the fence

RBA Governor Lowe sent mixed messages on the path of Australian interest rates during a speech today. On the one hand he said there was room to cut rates if necessary, but then cautioned that the Bank was close to “crossing point” where rate cuts become a risk. He expressed a desire that rates wouldn’t need to be cut and is hoping for a period of rate stability.

On the economy, he doubted that Q1 growth would contract due to the coronavirus and the only risk is if the virus is not contained. Q1 growth could take a 0.2% hit due to the wildfires but it is not expected to affect the full year’s data.

Australian yields perked up after the speech with the 3-year yield rising 10 bps to 0.71% while the 10-year yield climbed above the 1% mark for the first time in five days.

The Australian dollar failed to gain any upward momentum from the higher yields, instead falling 0.05% to 0.6735 versus the US dollar. AUD/JPY slid 0.18% to 73.667. The 100-day moving average is above at 74,.307.


AUD/JPY Daily Chart

Source: OANDA fxTrade


Services PMIs on tap

Today it’s the turn of the service sector reports on the purchasing managers’ indices. Germany, the Euro-zone and the UK all release final readings in Europe. Preliminary estimates were 54.2, 52.2 and 52.9, respectively. Similar data from Markit and ISM feature in the US calendar with 53.2 and 55.0 readings, respectively.

Central bank speeches come from ECB’s De Guindos, Lane and Lagarde, the Fed’s Brainard and the Bank of Canada’s Wilkins.

The full MarketPulse data calendar can be viewed at



This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Andrew Robinson

Andrew Robinson

Senior Market Analyst at MarketPulse
A seasoned professional with more than 30 years’ experience in foreign exchange, interest rates and commodities, Andrew Robinson is a senior market analyst with OANDA, responsible for providing timely and relevant market commentary and live market analysis throughout the Asia-Pacific region. Having previously worked in Europe, since moving to Singapore he worked with several leading institutions including Bloomberg, Saxo Capital Markets and Informa Global Markets, proving FX strategies based on a combination of technical and fundamental analysis as well as market flow information. Andrew began his career as an FX dealer with NatWest and the Royal Bank of Scotland in the UK.
Andrew Robinson

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