Markets Move Away From Extreme Fear
FxPro Financial Services Ltd | Oct 31, 2018 04:44AM ET
On Wednesday morning stock markets are developing a rebound. However, the currency markets still demonstrate a demand for dollar.
Futures on S&P 500 have added 0.3% after the growth by 1.9% the day before. Japanese Nikkei 225 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 effect.
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 GBP/USD 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.
Alexander Kuptsikevich, the FxPro analyst
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.