The strengthening of the riskier assets along with the weakness of the safe-haven dollar suggests that investors’ risk appetite is back.
U.S. stocks continue to rally as it seems that traders prefer to bet on a global economic recovery.
Experts suggest that the rally is driven mostly by short covering by speculators who had sold stocks earlier on a global recession.
However, as the rally is mainly depicted in the stock market the gap with the real economy is growing.
IHS Markit’s Final Composite Purchasing Managers’ Index (PMI) reported a contraction in Eurozone economic activity in May. In addition, the number of people that lost their jobs in the euro zone in April was 211,000. This brought the number of the unemployed to 11.919 million or 7.3% of the workforce, up from 7.1% in March.
The global economy is at risk for several reasons: a second wave of COVID-19 infections, Sino-U.S. tensions and protests swelling across the U.S. The U.S. Department of Defense has moved about U.S. Army troops into the Washington, D.C., after several nights of violent protests.
However, there are some signs of business activity recovery as governments slowly restart their economies. In China, a private survey of service sector activity showed its index recovered to pre-epidemic levels in May. According to the research, the world’s second-largest economy returned to growth.
START TRADINGForex – Riskier assets continue to shine
President Trump’s threats to militarize response to spreading protests left some currency traders confused about the market’s direction. At the same time, US stocks continue to rally.
The U.S. dollar index against a basket of six major currencies fell nearly a three-month low of 97.28.
The greenback grinded lower against safe-haven currencies due to concerns about the widening economic impact of protests in the United States. Moreover, the US currency fell against most currencies as the prospects for economic recovery led investors to buy riskier assets.
The dollar bought 0.9613 Swiss franc, close to a two-month low.
The safe-haven Japanese yen fell 0.1% versus the dollar to 109.71.
The Australian dollar hit a five-month high of 0.6982 against the U.S. dollar.
The New Zealand dollar was up 0.3%, after earlier reaching a three-month high of 0.6430.
The euro topped an 11-week high on Wednesday, being last up 0.4%, on track for a seven-day winning streak. The seven-day winning streak was the longest since December 2013.
The common currency also rose against the Swiss franc to $1.0797, the highest since Jan. 14, trading last up 0.4%.
The pound hovered around $1.26 on Wednesday after rising to a one-month high against a broadly weaker dollar. Against a weakening dollar, the pound was last at $1.2580, up 0.2% on the day.
Versus the euro, sterling lost 0.1% to 89.07 as it is still weighed down by many factors, including Brexit-related risks.
Brent crude futures for August were down 13 cents, or 0.3%, at $39.44 by 1042 GMT. They have earlier touched their highest since March 6 at $40.53. West Texas Intermediate (WTI) crude for July fell 15 cents, or 0.4%, to $36.66.
PLEASE NOTE The information above is not investment advice.
Sources: Reuters, Investing, CNN money