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Panic Selling Can Lead To Multi-Day FX Moves

By Kathy LienCurrenciesOct 26, 2020 05:34PM ET
www.investing.com/analysis/panic-selling-can-lead-to-multiday-fx-moves-200542416
Panic Selling Can Lead To Multi-Day FX Moves
By Kathy Lien   |  Oct 26, 2020 05:34PM ET
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The mood is shifting in the financial markets. With eight days until the U.S. Presidential election, investors are finally growing nervous. The Dow Jones Industrial Average fell more than 900 points intraday and, typically, when there is such an aggressive one-day decline, further losses are likely. Panic selling will often lead to big multi-day moves in currencies. And, between record-breaking coronavirus cases in the U.S. and Europe, dimming odds of a pre-election stimulus deal and U.S. election uncertainty, investors have plenty to be worried about.
 
This is a big week in the markets. Not only will time run out completely if the White House can’t compromise with House Speaker Nancy Pelosi, but the second COVID-19 wave caught European nations completely unprepared. Many are tightening restrictions to control their outbreaks. Unfortunately, the localized piecemeal approach is not working, and some nations could be forced to impose nationwide lockdowns. If one major country decides to do so, others could follow. We’re watching France very closely as it reported 52,000 new virus cases on Sunday. This is now almost seven times more cases than its first wave peak in March. For now, the euro refuses to fall, but a return to complete nationwide lockdowns in some of the Eurozone’s biggest countries could be the tipping point for the currency. The European Central Bank’s monetary policy announcement is one of the most important event risks this week. And with virus cases surging across the region, it will have no choice but to set the stage for easing before year-end. Diversification out of U.S. dollars is the only reason why EUR/USD is still trading above 1.1800, but even that may not keep the currency supported for long.
 
There are a number of factors that could affect how the U.S. dollar and U.S. markets trade this week. Aside from the upcoming election, third quarter GDP numbers are scheduled for release, and it’s a busy earnings week. GDP growth is expected to snap back sharply in Q3. If it does, there’s no doubt President Donald Trump will try to point to this improvement as a reason for not encouraging more restrictions despite record-breaking new virus cases and a 40% surge in hospitalizations over the past month. The federal government has basically given up, with the White House chief of staff saying the administration is not going to control the virus – opting instead to focus its efforts on vaccines and treatments. Some states, like Illinois and New Jersey, have announced their own curfews. The city of Newark issued an 8 p.m. curfew for all non-essential businesses. More could follow. Weak earnings could also accelerate the slide in stocks, with some of the biggest tech names are reporting this week. 
 
All of the commodity currencies succumbed to risk aversion today, with the Canadian dollar leading the slide. The Bank of Canada is not expected to change monetary policy this week, but recent global developments and the ongoing closure of the U.S.-Canada border should leave it cautious. New coronavirus cases are also on the rise in Canada, albeit at a far slower pace than in the U.S. and Europe. The New Zealand dollar was the most resilient currency, falling only slightly against the greenback. New Zealand trade data is scheduled for release this evening, and the uptick in the manufacturing PMI index signals a potentially stronger release. 
Panic Selling Can Lead To Multi-Day FX Moves
 

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Panic Selling Can Lead To Multi-Day FX Moves

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Comments (11)
Braem Dumisani
Braem Dumisani Oct 27, 2020 6:08AM ET
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what are ur thoughts on USD/Zar??
John Thompson
John Thompson Oct 27, 2020 6:08AM ET
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Like shes says stable like virus infection rate
Chris Black
ChrisBlackforex Oct 26, 2020 11:39PM ET
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Short Momental Reverse 20pip pullback & rally last support at 1.1830
Thomas Posson
Thomas Posson Oct 26, 2020 7:33PM ET
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no doubt about it Republican party is firing trump
Chris Poulos
Chris Poulos Oct 26, 2020 7:29PM ET
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time to panic
Gary Hoffman
Gary Hoffman Oct 26, 2020 6:05PM ET
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Overly bearish sentiment. Earnings could also be better than expected and there could be some positive momentum for a new stimulus deal now that the Amy Coney Barrett confirmation is (likely) over.
Jose reyes
Jose reyes Oct 26, 2020 5:55PM ET
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commie
Greg Heal
Greg Heal Oct 26, 2020 5:55PM ET
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Bad for you, buddy. She is one of very accurate with the facts and realistic writers for this site, which, I suppose, you don't put a penny on.
Magno Fernandes
Magno Fernandes Oct 26, 2020 5:52PM ET
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You has an english language ease for a brazilian understand.Thank you.
William Whitaker
William Whitaker Oct 26, 2020 5:50PM ET
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yup
Serdar Arslan
Serdar Arslan Oct 26, 2020 5:43PM ET
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Thanks...
Online money earner
Online money earner Oct 26, 2020 5:09PM ET
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thanks Kathy. u made my day
 
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