The week has begun with a very strong selloff of risky assets such as stocks, crypto, and currencies such as the Australian Dollar, with money flowing into safe havens like the Japanese Yen and the Swiss Franc.
- Markets have been unusually turbulent since markets opened for the week just a few hours ago. The Japanese Yen, which has already increased in value by close to 10% within just the last couple of weeks, has already risen by 2% today against a basket of currencies. Other safe havens gained as a big selloff in stocks got underway, with the Japanese Nikkei 225 Index ending the day lower by more than 10%. Markets in Japan and Korea were halted due to the outsized sudden losses. Such a swing towards risk-off sentiment may be explained by:
- US economic data released last Friday clearly showing the economy is stalling.
- Recent selloffs getting a psychological momentum of their own.
- A feeling the bull market had a great run, but its time must be up.
- Increasing concern that a full-scale war might erupt between Israel and the Iranian Axis. There are reports the US has warned the G7 nations that war could erupt as soon as tonight. However, Crude Oil is trading firmly lower, so the market does not seem too worried about Iranian oil assets.
- In the Forex market, the Japanese Yen has continued to make strong gains along with the Swiss Franc. The US Dollar can be a safe-haven currency but is not truly acting like one because of the Fed’s recent dovish tilt. The Japanese Yen has been the strongest major currency during this session, while the Australian Dollar has again been the weakest, putting the AUD/JPY currency cross in focus. Day traders will be interested in trading the high volatility in the Yen. There are Yen crosses that have moved by more than 10% in value in barely more than two weeks, which is extraordinary.
- Bitcoin has fallen very sharply today, by more than 8% within only a few hours. Almost all risky assets are trading lower today, due to such strong sentiment since markets opened.
- Gold is firm, again approaching its recent record high price.
- There will be a release today in the USA of ISM Services PMI data, followed very early tomorrow by the Reserve Bank of Australia’s policy meeting at which it is expected to leave rates unchanged.
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