Illustration: Aïda Amer/Axios

It's the euro's time now — at least that's how investors have been positioning recently.

What's happening: Speculators have raised their bets to the highest in nine years that the dollar will fall and increased bullish bets that the euro will rise to the highest level on record, Reuters reported citing data from the CFTC.

Driving the news: More money is flowing into the euro and euro-backed assets, including European stocks and bonds, as eurozone countries are seen bouncing back thanks to an $882 billion relief package passed by eurozone leaders and falling COVID-19 infection rates while the U.S. continues to struggle.

The big picture: “This is not a matter of growth this year or next year or predictions about the cycle — it’s really something more structural,” Nicolas Véron, a senior fellow at the Peterson Institute for International Economics, told Bloomberg.

  • “The budget deal changes the way financial markets look at the eurozone in a significant way."

By the numbers: The S&P 500 has outperformed the pan-European Stoxx 600 significantly, returning 3.2% year to date versus a 6.5% decline for the Stoxx, and 206% over the last 10 years vs the Stoxx's 33% gain, per FactSet.

  • The ZEW survey of economic sentiment in Germany, the eurozone's largest economy, rose to 71.5 from 59.3 the previous month. That was well above a forecast for 58.0 in a Reuters poll of economists, and the best reading since 2003, according to currency analysts.

The state of play: Analysts at the BlackRock Investment Institute announced they were raising their holdings of European equities to overweight, citing "the region’s robust public health infrastructure and a galvanized policy response."

  • "The different restart dynamics in the U.S. and Europe have also pressured the dollar, underscoring our preference for European equities and caution on U.S. stocks," they note.

Yes, but: The euro's 11% jump against the dollar since May has some in the currency market urging caution, as the last time investors packed into the euro like this in 2018 the market reversed and the dollar took flight against the continental currency.

  • Tuesday's market action may have been a preview as the greenback rose against most currencies. That was largely due to a reversal-of-risk appetite after Senate Majority Leader Mitch McConnell said negotiations in Congress on the next U.S. stimulus package had stalled.

The bottom line: Even though the U.S. is creating much of the global turbulence with rising trade tensions and an impasse on stimulus talks, the dollar likely would strengthen from safe-haven flows if risk appetite dries up again.

Go deeper

Dion Rabouin, author of Markets
Sep 23, 2020 - Economy & Business

Wall Street fears meltdown over election and Supreme Court

Illustration: Aïda Amer/Axios

The death of Justice Ruth Bader Ginsburg and President Trump's vow to name her replacement to the Supreme Court before November's election are amplifying Wall Street's worries about major volatility and market losses ahead of and even after the election.

The big picture: The 2020 election is the most expensive event risk on record, per Bloomberg — with insurance bets on implied volatility six times their normal level, according to JPMorgan analysts. And it could take days or even weeks to count the record number of mail-in ballots and declare a winner.

Updated 47 mins ago - Politics & Policy

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 10 a.m. ET: 32,881,747 — Total deaths: 994,821 — Total recoveries: 22,758,171Map.
  2. U.S.: Total confirmed cases as of 10 a.m. ET: 7,079,909 — Total deaths: 204,503 — Total recoveries: 2,750,459 — Total tests: 100,492,536Map.
  3. States: New York daily cases top 1,000 for first time since June — U.S. reports over 55,000 new coronavirus cases.
  4. Health: The long-term pain of the mental health pandemicFewer than 10% of Americans have coronavirus antibodies.
  5. Business: Millions start new businesses in time of coronavirus.
  6. Education: Summer college enrollment offers a glimpse of COVID-19's effect.

Durbin on Barrett confirmation: "We can’t stop the outcome"

Senate Minority Whip Dick Durbin (D-Ill.) said on ABC's "This Week" Sunday that Senate Democrats can “slow” the process of confirming Supreme Court nominee Amy Coney Barrett “perhaps a matter of hours, maybe days at the most," but that they "can’t stop the outcome."

Why it matters: Durbin confirmed that Democrats have "no procedural silver bullet" to stop Senate Republicans from confirming Barrett before the election, especially with only two GOP senators — Lisa Murkowski of Alaska and Susan Collins of Maine — voicing their opposition. Instead, Democrats will likely look to retaliate after the election if they win control of the Senate and White House.