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    Biden to authorize US military action in the Middle East—Sky news

    Source Fxstreet
    Jan 30, 2024 01:21

    US President Joe Biden is likely to authorize US military action in the Middle East as early as Monday night, per Sky News. The highly anticipated decision from Biden comes after three American troops were killed and dozens more were injured in an overnight drone strike in northeast Jordan near the Syrian border on Friday.  

    Market reaction

    At the time of writing, the US Dollar Index (DXY) is trading near 103.41, holding lower while losing 0.05% on the day.

    Risk sentiment FAQs

    What do the terms"risk-on" and "risk-off" mean when referring to sentiment in financial markets?

    In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.

    What are the key assets to track to understand risk sentiment dynamics?

    Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.

    Which currencies strengthen when sentiment is "risk-on"?

    The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.

    Which currencies strengthen when sentiment is "risk-off"?

    The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.

    Disclaimer: For information purposes only. Past performance is not indicative of future results.
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    Stock Market Today: Futures trade marginally lower to start critical weekS&P 500 futures fall 0.12%, Dow Jones futures drop 0.21%, and Nasdaq futures are unchanged.
    Source  Fxstreet
    S&P 500 futures fall 0.12%, Dow Jones futures drop 0.21%, and Nasdaq futures are unchanged.
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    China NBS Manufacturing PMI eased to 49.1 in February, Services PMI improved to 51.4China’s official Manufacturing Purchasing Managers' Index (PMI) eased to 49.1 in February from the previous reading of 49.2, the latest data published by the country’s National Bureau of Statistics (NBS) showed on Friday.
    Source  Fxstreet
    China’s official Manufacturing Purchasing Managers' Index (PMI) eased to 49.1 in February from the previous reading of 49.2, the latest data published by the country’s National Bureau of Statistics (NBS) showed on Friday.
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    US: Even a mild recession has become unlikely – CommerzbankIn the United States, the feared recession has so far failed to materialize – but could it still come? Economists at Commerzbank explain why we have changed their forecast and no longer expect a recession.
    Source  Fxstreet
    In the United States, the feared recession has so far failed to materialize – but could it still come? Economists at Commerzbank explain why we have changed their forecast and no longer expect a recession.
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