Australian Dollar

It’s been a much better start to the trading week then many thought possible with S&P futures indicating a 1% drop at least across Asian stock markets on the open, with many risk currencies gapping down this morning, before a swift reversal has seen risk come back much stronger.

The short squeeze continued on Wall Street Friday night as the Gamestop debacle spilled over into a selloff across the board on both sides of the Atlantic as nominal gains for the year evaporated.

Well, that was a fun night!

Via Credit Suisse: As we highlighted in our Key Themes for 2021, bearish the USD remains a core theme for 2021, but a consolidation/recovery phase was expected in the early part of the year following the fall to our first core bear target and major support from the 2018 low.

A sea of red out there on Asian stock markets in response to the largish falls on Wall Street overnight from a crazy short squeeze as the professionals (sic) continue to clutch their pearls as Redditors and Robinhooders go after their next target.

Wall Street’s wobble in the previous session has turned into a full rout overnight with short-exposed hedge funds tipping the major bourses deep into the red.

The Australian dollar took a pounding last night: As DXY surged off a little head and shoulders bottom: Westpac has the wrap: Event Wrap The US Federal Reserve’s FOMC left its policy settings unchanged as was widely expected: a 0%-0.25% Fed funds rate range,  and at least $120 bn/month bond purchases.

Risk is wavering throughout Asian stock markets with only Japanese stocks advancing as the USD firms against most of the major currencies in the lead up to tonight’s Federal Reserve meeting.

Via Citi: Monday saw hawkish messaging from a White House press conference on China relations as outlined here.

Last night saw a wobble in Wall Street despite the IMF upgrading global economic growth projections and a fall in the USD.

Risk is back on the table with Asian stock markets up across the board as the USD reverses its short term strengthening as we start another trading week and look towards the FOMC meeting.

Friday night saw the release of the latest PMI surveys on both sides of the Atlantic, with the US print unexpectedly higher but that economic recovery didn’t help risk markets higher with Wall Street finishing the trading week on a sour note.

From Friday: Current yuan exchange rate is within a reasonable and balanced range,” the State Administration of Foreign Exchange (SAFE), China’s fx regulator, said in a statement on Friday.

Asian stock markets end the week on a poor note, having absorbed the Biden inauguration and initial policy reversals, with commodity currencies weaker against USD as gold and silver remain relatively steady.

  Last night saw the frothiness in risk markets take a small pause as bond yields rose slightly on the lower than expected US weekly jobless claims, as the latest ECB meeting also made no waves.

Share markets are rising in co-ordination following the Biden inauguration, with risk appetite soaring overnight, with the USD in full retreat as gold and silver is breaking out to new highs.

Via Societe General: EUR/CNH may be the most important FX pair in the world now ◼We move from Janet Yellen’s confirmation hearing to the new President’s inauguration, which is likely to see more pomp and ceremony and less cause for markets to move.

Asian share markets are somewhat mixed and unsettled going into tonight’s newsflow with Trump “serving” his last day as US President, with focus and realisation of both further stimulus and big tax increases confusing risk appetites.

A couple of charts today show that there is a developing problem for the short USD trade that is currently dominating markets.

Two events changed risk appetite overnight with the closely watched German ZEW survey and Janet Yellen’s testimony in Congress supporting the bullish mood on Wall Street as traders returned from the US long weekend.

Asian share markets are no longer unsettled as the realisation that an adult will be in the Oval Office in a few days kicks in the risk spirits with broad gains across most markets and S&P futures looking bright for the return of traders from the US long weekend.

The US long weekend had a deleterious effect on trading volume and hence volatility overnight with most risk markets remaining in stalled mode as they await there queues from Wall Street.