ZFX: Hopes on Fed’s policies propped up the investment sentiment

As the market expects the Fed will take further action to cope with the economic downturn, investment sentiment turned to be bullish again on Wednesday.

Some other factors were also supportive, including reopening economies, rally of the oil prices, hopes on the vaccine development and relatively weak dollar, making the three major Wall Street indexes jumped higher.

The FOMC minutes of April meeting showed that members were worried about the economic outlook of the US as the coronavirus created an “extraordinary amount of uncertainty and considerable risks to economic activity in the medium term”. Rate would not be raised until the economy is back on the track. Furthermore, all members agreed that the Fed will use full range of tools to support the US economy.

Gold fell during the Asian session on Thursday. Investors seems are looking forward to the economic recovery, lowering the safe-haven demand.

ZFX analyst Jacob Leung said that the market is currently focusing on the Fed and expects more stimulus measures, triggering the “risk on” sentiment. The VIX dropped below 30, meaning that risk appetite is dominated. Some fundamentals or bearish factors may even not be reflected in the market move, like China-Australia relations, China-US tension.

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