A solid start to the Asia session amid lower implied volatility suggests investors are encouraged that the growth in new coronavirus cases is topping out in Western Europe. Outside Europe, there are signs of a plateau in New York state; a US carmaker said that it plans to reopen plants in the US and Canada on May 4.
Within Asia, developing signs of industry returning to work tells us that production in China will be the first part of the economy to lift off – this is providing a boost to local markets while helping out commodity prices.
Despite increasing signs that industrial production is normalizing in China, there are few immediate signs that Australia is benefiting yet, although the list to sell AUDUSD shortened considerably overnight.
And in the context of more monetary and fiscal stimulus, US House Speaker Nancy Pelosi is pushing for a further budgetary package. Increasing economic support is likely to be a key input into the November US Presidential election.
More benign conditions in equity (lower vol) points to lower implied vol in FX and an unwind in risk-averse long USD positions.
In a further signal that the new daily case curve is flattening in Korea, 47 cases were reported for April 6, the third consecutive daily decline and fourth straight sub-100 day. Current guidelines on social distancing are in place until April 19.
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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