The risk momentum of the past 2 weeks is only accelerating. Equity sentiment is surging with US markets buying on any sign, the economy is not only reopening but will recover at a significantly faster rate than forecasted.
The S&P 500 breached 3000 points for the first time since this crisis begun, the NASDAQ is now within 2.5% of its all-time high (also its pre-COVID high).
This risk-buying sentiment is also feeding into FX, the original movements in the USD from this crisis are unwinding with increasing significances: DXY fell 1.0% on Tuesday alone, and it has now fallen 3.86% since its peak on March 19. This underperformance is most significant when compared to anything considered a ‘risk’ investment.
EUR/USD continues to ebb and flow in sharp up and down movements, but the pattern shows that the up movements are stronger than the down and it looks to be on the verge of testing $1.10, a psychological level that might see buying up to $1.12.
GBP/USD - GBP continues to rally despite the dire scenario the UK finds itself in. It is now within reach of the $1.24 resistance level at $1.2330, a level achieved after the Bank of England’s chief economist Haldane stated that the prospect of negative rates from the bank were ‘not likely near-term’, taking a strong downside risk away.
But risk is even more prevalent in the commodity currencies, with the Aussie Kiwi and NOK now the best performing G10 currencies of the past week with the AUD being the standout.
AUD/USD has now recovered all loss since the March 5 crash and has actually gained since the crisis began. On Tuesday, the pair hits $0.6675 on the news of the government planning to focus on education and industrial relation reforms to boost economic growth, while bulk commodities continue to hold at elevated levels. The clearest example is iron ore, which was at $95.80 a tonne at the time of writing.
NZD/USD is also on a tear as the kiwi economy starts to open up. It’s now testing $0.6200 (high of $0.6229 on Tuesday), which is the strongest read since 12 March and the pair looks to be following its trans-Tasman peer on being bid up on any ‘recovery hopes’.
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