ZFX: Dollar gained while risk aversion recovered

Monday (May 11) news review

• The market is concerning the rising tension between China and the US, triggering risk aversion. Earlier, US President Trump said that he is having “a very hard time with China”. He also said that he hasn’t decided how to deal with the trade relationship, showing doubt of the implementation of the phase 1 trade agreement. On the other hand on Monday, Global Times quoted source from Chinese officials, saying that “more hawkish voices have emerged”, calling for renegotiation. As dissatisfaction with the phase 1 agreement has been growing in Beijing, some voices even suggested to invalidate the agreement.

• More and more countries are gradually restarting their economic activities. However, the bad news is that the second wave of the outbreak may occur in Germany and South Korea. Global stock markets were affected by the fears and investors were worried about the timing of economy reopening.

• The greenback gained due to the risk aversion. Tensions between China and the US, coupled with the fears over a second wave of coronavirus outbreak, have triggered the demand for safe-haven. In addition, Atlanta Federal Reserve Bank President Raphael Bostic said that he is “not a big fan” of negative interest rates as he believes negative interest rate is a “weaker tool”, also supporting the rebound of dollar.

• The new coronavirus outbreak is still severe, with 4.2 million confirmed cases worldwide, and more than 280000 deaths.

ZFX analyst Jacob Leung said that, as mentioned earlier, those uncertainties still exist in the financial markets. Once investors review those factors like the pandemic issue, China-US relations and Fed policy, it may be quite bearish to the market.

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Risk Warning: The above content is for reference only and does not represent ZFX’s position. ZFX does not assume any form of loss caused by any trading operations conducted in accordance with this article. Please be firm in your thinking and do the corresponding risk control.

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