Investing.com | May 30, 2017 05:18AM ET
by Pinchas Cohenh2 The Big News/h2
Asian stock markets are continuing yesterday’s low liquidity as the Hong Kong and Chinese markets remain closed for holidays, and after UK and US markets were closed for holiday weekends yesterday. With so many major markets closed trading was leaderless and lacking a coherent picture.
The euro received another beating—its fourth consecutive day following a repeated dovish delivery by ECB President Mario Draghi to the European Parliament, amid investors’ ambivalence toward the Federal Reserve's interest rate plans. Draghi's stated that the euro area still needs expansive monetary stimulus to restore stable inflation, even as the economy accelerates.
The euro had additional problems though after the German publication Bild reported that Greece may opt out of its next bailout payment if creditors cannot strike a debt relief deal. If this is true, it increases the probability of a default, which creates two overwhelming risks: the default itself and the renewed possibility of a Grexit. Furthermore, comments by former Italian Prime Minister Matteo Renzi on Sunday, favoring holding elections in September, at the same time as Germany's, brought up the possibility of an Italexit and harmed the euro.
In a rare occurrence, Japanese equities and the yen were both strengthened yesterday after the release of a robust retail sales report, even though normally a higher yen weighs heavily on equity prices. Perhaps the thin trading will allow some traders to float higher for later profit-taking, even as soon as tomorrow.
In our opinion, now is the time to back the yen. It is the only major currency to advance against the dollar, and it’s not only because of robust retail sales, but also as a result of the risk surrounding the euro. That’s why the yields on 10-year bonds are falling today, a fifth consecutive daily decline since Draghi delivered his first dovish message in Madrid on Wednesday. However, gold is the only safe haven that currently is in decline.
This leaves traders with two-layered question:
Currencies
Stocks
Commodities
Bonds
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