At the start of the week, the Japanese Yen performed quite well. Along with the JPY, the US Dollar and the Swiss Franc also followed behind.
As of this week, the market shook due to a US-China argument as to which country originated the Covid-19 pandemic. According to a virtual news report from Fox News in the town hall, US President Donald Trump said that he may decide to add more Tariffs to the Chinese trades in order to punish them for spreading the Coronavirus. From the point of view of investors, this is an impulsive move by Trump that threatens the return of the US-China trade wars.
Risk Appetite Already Dropping
However, Trump’s tirade wasn’t the only reason why risk appetite drop. In fact, risk appetite was already dropping even before the speech. What Trump did is that he further pushed the decreasing risk-on mood.
The existing risk-off mood most likely came from the shrinking of the global economy by 1.5% in the year. Whenever the risk sentiment is low due to uncertain market conditions, investors usually flock to possible safe haven currencies. These include Japanese Yen and the US Dollar. The Swiss Franc is also usually a good choice that investors put their money into.
Currencies Turning Bearish
On the other side of the coin, riskier currencies including the British Pound and the Australian Dollar saw an increase in shorts according to the Commitment of Traders Report. The Canadian Dollar also showed some increase in the number of shorts.
However, it is still to be seen as to whether or not these movements will create big price action in the week.
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