Global markets continued to recover strongly, with equities and commodities surging on overnight markets. The latest rendition of the virus, is being perceived as even less dangerous than the previous iteration and markets are brushing it off. The risk to the economy appears to be low and so risk-on is the trade. Oil prices jumped over $USD4/barrel, reflecting a strong surge in demand for commodities, while global equites rallied strongly. US Bond Yields continued their recovery and the US Dollar rallied against the majors. The GBP drifted to 1.3220, while the EUR slipped to 1.1240, despite better than expected economic data. German Industrial Production increased 2.8%, although ZEW economic sentiment was flat.
Oil prices surged to $USD73/barrel, dragging other commodity prices upwards. The surge in demand allowed the rally in the reserve to be overwhelmed by the commodity gains and this was reflected in the currencies. The NZD bounced to 0.6770, while the AUD powered back through 0.7100, also assisted by the RBA. The RBA left interest rates unchanged and QE in place, but had a very bullish outlook on the economic recovery, moving forward.
Markets will await the Tankan report, along with Japanese GDP growth numbers, set to be released in todays trade. The virus has been dismissed and the markets are responding strongly, although the Fed’s policy next week could turn risk asset sentiment sharply.