The markets remain incredibly fragile. The negative equities view isn’t just affecting a sector or two, but it’s across the board as large-cap stocks are wobbling on the toxic combination of higher US yields and risk aversion, which has equity investors running for cover. But none the less, a very confusing landscape to start the week as the risk parameters have been up and down like a rollercoaster this morning.
An early reprieve from Chinas RRR cut has given way to the reality check that US Treasury yields are on the move higher again.
USDCNH somewhat muted reaction to the RRR cut is a result of Vols remaining in check as the Pboc has done an excellent job taming that beast lately. With around 38-40 % probability of USDCNH touching 7.00 in the next month, local traders look comfortable in selling upticks in the absence of any repricing on the options curve. Also, the lingering fears of Pboc intervention on and aggressive RMB sell-off are holding the raging USD bulls back on that front.
Oil markets remain pressured by Iran waivers and Opec supply. Headline headwinds blustery but the fear of the crowded trade mentality could see emotion prevail over logic. Markets in a bit of flux with risk aversion and the stronger USD weighing on sentiment.
Gold is heading lower on higher US yield, but in the meantime, it’s holding above the critical $1195 support
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