ZFX: Weak dollar propped up risk appetite

ZFX: Weak dollar propped up risk appetite
ZFX: Weak dollar propped up risk appetite

Risk-on sentiment continued on Tuesday, as the market expects the White House will soon launch another economic stimulus package to tackle the pandemic-driven recession. On the other hand, Trump and his administration clarified the trade deal with China is “fully intact”, assuring the whole market. All three Wall Street indexes rose on Tuesday, of which the Nasdaq advanced 0.74%.

 

U.S. Treasury Secretary Mnuchin said that the US will not shut down the economy again and the stimulus package may be passed in July, which sparked the hopes of economic recovery.

 

However, the market was still cautious about the second wave of coronavirus cases, particularly in the US. Such concern boosted gold price jumped to its highest in nearly eight years. But, dollar was not supported by the safe-haven demand. The weakness of the dollar implied a positive signal of the market sentiment, encouraging investors to bet on riskier assets.

 

The greenback was still under pressure on Wednesday Asian session and riskier currencies like Aussie and Sterling were benefited.

 

ZFX analyst Jacob Leung said that, obviously Tuesday’s move was still dominated by the weak dollar. It is a bit contradictive that the market still expects a rapid economic recovery under the fears of the second wave pandemic. To a certain extent, it can be described as “stubborn optimism”. It should be alerted that the investor sentiment generally improved but still very sensitive.

 

 

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