Market Overview

FxPro: Halloween’s Eve: markets moved away from extreme fear

On Wednesday morning stock markets are developing a rebound. However, the currency markets still demonstrate a demand for dollar.

Futures on S&P500 have added 0.3% after the growth by 1.9% the day before. Japanese Nikkei225 has grown by more than 1% after 3.2% in the “green zone” the day before. Key Chinese indices are also in the black, developing a rebound from the local lows.

At the same time, there are a few points that do not allow us to fully surrender to the power of optimistic moods.

The demand for the dollar is often a good indicator of investors’ concern. And this trend is still in force. The USDX rose by Wednesday morning to 96.80 and returned to the highs area from June 2017, where it rose briefly in August. It is worth highlighting the weakening of the single currency due to political problems in Europe (falling support for Merkel and budgetary disputes in Italy).

Sterling also suffers, because as it approaches the deadline, lawmakers still did not approve the plan for Britain to leave the EU, which increases the risks of “no-deal Brexit”. The GBPUSD failed on Tuesday below 1.27, losing 0.9% in a day.

The Chinese yuan continues to slide to the mark of 7.0, despite the rebound in the stock markets. In debt markets, the yields of long-term U.S. government bonds are growing after a period of retracement from the local highs.

On the balance, it means that means that while the markets have moved away from the levels of extreme fear that they experienced last week, the negative trends stay hold. The main trend is still the growth of yields on US long-term bonds following the rise in interest rates in the United States, which reduces the attractiveness of investments in risky assets, such as currencies of developing countries and shares of high-growth companies. In turn, this pulls demand for the US currency and puts pressure on commodity asset quotes.

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