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Forex Today: Market sentiment improves at the start of the new week

This is what you need to know to trade today Monday, 22 April:

US stock index futures started the week higher, reflecting an improvement in risk sentiment. On Monday, the European Commission will publish preliminary data on consumer confidence in April and the president of the European Central Bank (ECB) will give a speech. No high-impact data will be published on the US economic agenda.

Investors remain optimistic about avoiding a worsening of the crisis in the Middle East after a relatively quiet weekend for news on the conflict between Iran and Israel. At the time of writing, US stock index futures are up 0.4% to 0.6%. The US Dollar Index (USD) remains stable near 106.00 and the 10-year US Treasury bond yield continues to fluctuate above 4.6%.

Price of the US dollar in the last 7 days

The following table shows the percentage change of the United States Dollar (USD) against the main currencies quoted in the last 7 days. The US Dollar was the strongest currency against the Japanese Yen.

USD EUR GBP CAD AUD JPY NZD CHF
USD -0.15% 0.66% -0.25% 0.72% 0.90% 0.62% -0.29%
EUR 0.15% 0.80% -0.10% 0.87% 1.06% 0.78% -0.12%
GBP -0.67% -0.81% -0.91% 0.06% 0.24% -0.04% -0.97%
CAD 0.25% 0.10% 0.90% 0.97% 1.14% 0.87% -0.05%
AUD -0.73% -0.88% -0.07% -0.98% 0.18% -0.10% -1.02%
JPY -0.89% -1.05% -0.22% -1.16% -0.18% -0.26% -1.21%
NZD -0.63% -0.77% 0.02% -0.88% 0.10% 0.27% -0.93%
CHF 0.27% 0.12% 0.93% 0.03% 0.99% 1.17% 0.89%

The heat map shows the percentage changes of the major currencies against each other. The base currency is chosen in the left column, while the quote currency is chosen in the top row. For example, if you choose the Euro in the left column and scroll down the horizontal line to the Japanese Yen, the percentage change that appears in the box will represent EUR (base)/JPY (quote).

During the Asian session, the People's Bank of China (PBoC) announced that it was keeping the prime interest rates on one- and five-year loans unchanged at 3.45% and 3.95%, respectively. Separately, the Chinese Ministry of Commerce announced on Friday that it had decided to impose a 43.5% tax on imports of propionic acid from the United States. Propionic acid is commonly used in food, feed, pesticides and medicine.

He AUD/USD did not react to the China-related news and rose to the 0.6450 area at the weekly open, before retreating slightly. Judo Bank Manufacturing and Services PMI data for April will be released early in the Asian session on Tuesday.

The Swiss National Bank (SNB) announced early on Monday that it was raising banks' minimum reserve requirements from 2.5% to 4%. He USD/CHF ignored this announcement and is trading slightly higher above 0.9100.

He EUR/USD closed the previous week practically unchanged. The pair remains stable above 1.0650 in the European morning on Monday.

He GBP/USD came under bearish pressure in the American session on Friday and broke below 1.2400, ending the week in negative territory. The pair remains in a consolidation phase above 1.2350 in the first hours of the European session.

He Gold posted small daily gains on Friday, but closed the week below $2,400. XAU/USD suffered a technical correction on Monday and is down more than 1% on the day, below $2,360.

He USD/JPY oscillates in a very narrow channel below 155.00 on Monday. On Friday, the Bank of Japan will announce monetary policy decisions.

Risk Sentiment FAQ

What do the terms “risk-on” and “risk-off” mean when referring to sentiment in financial markets?

In the world of financial jargon, the two terms “risk appetite (risk-on)” and “risk aversion (risk-off)” refer to the level of risk that investors are willing to bear during the investment period. reference. In a “risk-on” market, investors are optimistic about the future and are more willing to buy risky assets. In a “risk-off” market, investors begin to “play it safe” because they are worried. for the future and, therefore, buy less risky assets that are more certain to provide a return, even if it is relatively modest.

What are the key assets to follow to understand risk sentiment dynamics?

Typically, during periods of “risk appetite”, stock markets rise, and most commodities – except gold – also appreciate as they benefit from positive growth prospects. The currencies of countries that are large exporters of raw materials strengthen due to increased demand, and cryptocurrencies rise. In a “risk-off” market, Bonds – especially major government bonds – rise, Gold shines and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar benefit.

Which currencies strengthen when sentiment is “risk-on”?

The Australian Dollar (AUD), Canadian Dollar (CAD), New Zealand Dollar (NZD) and minor currencies such as the Ruble (RUB) and the South African Rand (ZAR) tend to rise in markets where there is “appetite for risk.” This is because the economies of these currencies rely heavily on commodity exports for their growth, and these tend to rise in price during periods of “risk appetite.” This is because investors anticipate higher demand for raw materials in the future due to increased economic activity.

Which currencies strengthen when sentiment is “risk averse”?

The major currencies that tend to rise during periods of “risk aversion” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The Dollar, because it is the world's reserve currency and because in times of crisis investors buy US public debt, which is considered safe because it is unlikely that the world's largest economy will go into default. The Yen, due to the increase in demand for Japanese government bonds, since a large proportion is in the hands of domestic investors who are unlikely to get rid of them, even in a crisis. The Swiss franc, because strict Swiss banking legislation offers investors greater capital protection.

Source: Fx Street

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