Great news for the risk markets is that the US dollar continues to trade weaker when cross-asset vol is falling. The latest bout of dollar weakness comes on the back of a strong performance in US equities, particularly after the release of the FOMC minutes which indicated that the Fed would apply extraordinary stimulus until the economy regains its footing.
While the Fed’s comments are nothing new, when combined with the White House soon due to communicate a roadmap for relaxing social distancing, it’s driving a more positive tone in risk sentiment. Risk assets continued to rally on the perception that the global economy will open up again quicker than expected.
The icing on the cake will be a 'good' outcome for oil prices from the OPEC+ meeting; this would be a global agreement to cut output (at least ~10 mn b/d) beyond OPEC and Russia, although demand concerns will persist.
All eyes and ears are trained on the OPEC meeting, starting 2:00pm BST
How do we get to $30 on WTI?
A positive outcome for oil prices from the OPEC+ meeting would be a global agreement to cut output beyond OPEC and Russia. That would require cuts from the US and smaller prodcuers.
Gold is trading in its recent range after it hit highs earlier the week. If the coronavirus situation worsens next week and the market goes into risk-off mode, this would give bullion further support to the topside.
But trading conditions were hampered in Asia due to a technical glitch on the CME C No PM prices from the futures markets leaves liquidity to gold and silver in EBS only. There's no market for platinum and palladium until CME comes back up. But prices eventually came back online around 10:30am HK time.
There was widespread market uncertainty and the improved opportunity cost of holding gold as yields move lower.
Oil steady MYR vs. IDR
Oil is holding onto overnight gains with the WTI front-month contract up around 7% from the New York lows. This is a crucial focus of local currency traders, especially those in Malaysia beyond the Ringgit. However, oil price declines through March show the risk that lower prices could drive local yields to slip, and in that situation the IDR is most vulnerable to this secondary dynamic.
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Soaring US yields trigger the wrecking ball effect as yields become a source of volatility for risk, rather than a source of support