Risk Rally Rolls On

Posted on

April 7, 2020
AUD rallies on hawkish RBA
Johnson remains critical
Nikkei 2.01% Dax 3.79%
UST 10Y 0.74%
Oil $27/bbl
Gold $1654/oz
BTCUSD $7362

Asia and the EU
AUD RBA keeps rates on hold

North America Open
CAD Ivey PMI 10:00

Another positive night of risk flows in financial markets with the dollar weakening across the board while equities rallied for the third day in a row.

Global financial markets continued to anticipate the end of the coronavirus lockdown as curves in Italy Spain and France started to flatten out and the world’s biggest hotspot – New York City – saw a dramatic decline in admissions as the draconian social distancing measures appear to be taking effect.

Whether this is a true top in the pandemic or not remains to be seen, but investor sentiment was bullish driving stock futures higher by nearly 3% ahead of the New York open.

In FX the Aussie was the leader of the board surging more than 1.5% a decidedly hawkish statement from the RBA, which while acknowledging the challenges of the coronavirus pandemic also hinted that its QE operations could be tapered.

The RBA stated, “Since this target was introduced, the Bank has bought around $36 billion of government bonds in secondary markets, including bonds issued by the states and territories. The Bank will continue to promote the smooth functioning of these important markets. If conditions continue to improve, though, it is likely that smaller and less frequent purchases of government bonds will be required.”

That single line helped propel Aussie towards the .6200 level and in Asian and early European trade but with movement in Australia still restricted and trade and travel with China likely to remain depressed for quite a considerable amount of time, it’s much more likely that the RBA’s QE efforts will need to be maintained for quite some time, keeping a lid on any AUDUSD rally.

In North America today the calendar is generally quiet with just JOLTS on the docket, so the focus in FX will be equity markets as traders look to see if risk rally can extend for the third day in row.

Boris Schlossberg
Managing Director

Leave a Reply

Your email address will not be published. Required fields are marked *