European markets open in a risk-averse mode with Bunds rallying and the euro down. News has once again been negative with Germany announcing a hard lockdown for Easter and Asian stock markets struggling.
Over the last couple of days, the dire European situation has done limited damage to risk sentiment, and in fact, the Monday session suggested that if things are calm, the bias is for Europe to recover. However, the 15-hour meeting of the Germany chancellor with state presidents ended with unexpectedly harsh measures announced around 03:00 Berlin may have nudged things in a renewed negative direction.
How far will the fixed income surge and euro drop go? European sentiment looks close to rock bottom, but some good news -- or at least a few days of no negative news -- is needed for a lift in sentiment.
EURUSD Edging Towards Downside Test
The Turkish lira move was fairly contained and as US stocks rose Monday afternoon, EUR/USD had a bit of a squeeze. Closer to 1.1950 it keeps running out of steam, marking the top end of the recent tightening range. The market remains nervous especially with the slow European vaccination program and the approaching third wave. Feels like a matter of time until it tests the downside 1.1870-80 again.
Oil Under Pressure On Covid-19 Fears
Oil remains under pressure as news over the weekend and early this week suggests covid-19 risks are potentially on the rise again. Oil in the upper $60s/bbl was pricing in a relatively smooth path back to normal demand levels, but recent data underscores the precarious nature of the ongoing global demand recovery and oil sentiment. The medium and longer-term fundamentals for oil look fine, with a deficit driven by OPEC+ cuts helping drive a global inventory draw-down, but the oil price will remain very sensitive to near-term news with implications for the demand outlook