The mood in the markets shifted yesterday, with the sentiment of investors having a much more positive stance than of late and this has benefited the euro with the single currency gaining more than 1% to the dollar since the start of the week.
The bullishness is driven by a combination of good news with hopes raised about a vaccine for the coronavirus being available in the not too distant future and the joint proposal by Germany and France for a recovery fund that would be allocated to the EU’s budget.
The Franco-German agreement is extremely significant as it could pave the way to some form of debt share, something that has so far been rejected by northern member states including Germany. Should other member states be in agreement we could be looking at a pivotal change in dynamics and that will bring much needed stability to the EU and offer further support to the euro.
Ricardo Evangelista – Senior Analyst, ActivTrades
Gold declined sharply yesterday afternoon as a switch to risk on dominated markets. Rumours about a vaccination against the COVID-19 are diminishing investors’ appetite for safe haven assets. In early trading today, bullion is attempting a recovery but much of yesterday’s strong decline still needs to be absorbed by markets.
From a technical point of view, traders are watching to see if bullion can hold the key support level of $1,725-$1,730. A fall below these levels would increase chances for further declines and could make Friday’s rally a false break up. Otherwise, if the price holds on at $1,730, yesterday’s fall could be absorbed by markets and the bullish trend would slowly recover strength.
Carlo Alberto De Casa – Chief analyst, ActivTrades