Risk sentiment up in forex markets as week begins

Chris Lee

Risk sentiment appeared to be on the rise in the foreign exchange markets on Tuesday as a sense that the worst of the coronavirus pandemic might be over seemed to settle.

The single European currency rose somewhat as Tuesday’s trading got underway, for example, while the two Antipodean currencies also shot up.

According to analysts, however, these rises could well be limited.

The euro, they claim, is at risk of falling once fights over how to pay for the proposed coronavirus recovery fund set in.

The continuing backdrop of a potential trade spat between China and the US could also pose problems for the trade-linked currencies of Australia and New Zealand.

However, traders appeared to have thrown these cautions to the wind on Tuesday – at least for now.

The single currency was seen up by almost half a percentage point in its pair against the US dollar, reaching $1.0935 at one stage.

And in a sign that trade fears are not gripping the markets too much at present, both the Australian and Kiwi dollars – which are known for dropping during times of trade turmoil – were up by approximately 0.7% each against the greenback.

The Australian dollar was up to 0.6590 in this pair, though it was unable to scale the highs of last week.

Over in New Zealand, the dollar there was spotted at 0.6145.

In a sign that concern over the price of oil was also not particularly plaguing the markets, the Norwegian crown – which often sees its value linked to oil prices given Norway’s commodity exports – was up by a percentage point.

This occurred in its pair against the American dollar.

Overall, the crown was spotted at 9.9560.

Sterling was up also, by more than half a percentage point against the dollar.

It was seen at $1.2261 at one stage.

In its pair against the single currency, meanwhile, it was up by a fifth of a percentage point.

The British government is facing a growing political crisis over the behaviour of the Prime Minister’s advisor, Dominic Cummings, who is accused of having broken lockdown rules.

However, the pound’s performance did not appear to be overly restrained by this.

The coronavirus pandemic, which has inflicted significant disruption and upheaval on economies across the world, appears to be turning a corner.

Several economies across the globe have begun to move away from lockdown measures in part, with the UK confirming that a range of economic hubs, including shopping centres, will reopen in June.

In Japan, meanwhile, the state of emergency that had been in place there was concluded at the start of this week.

For investors, one of the key legacies of the pandemic will be the scale of the financial stimulus packages that have been instituted in economies across the globe.

How governments will deal with these and potential future packages in the months and years to come remains to be seen.

Risk Statement: Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit. The high degree of leverage can work against you as well as for you.

Chris Lee
Blackbull LogoYour capital is at risk
  • User-friendly platform with great trade-analysis tools
  • Leverage Up To 1:500
  • Spreads as low as 0.00 pips
  • Quality trade execution thanks to high-spec IT infrastructure
  • $0 minimum account opening balance
  • 26,000 tradeable instruments
  • Not available in all jurisdictions
  • Regulatory infrastructure
tickmill_logo-173% of retail CFD accounts lose money 73% of retail C...
  • Well regulated
  • Ultra-fast and high leverage trading
  • Spreads as low as 0.0 pips
  • Comprehensive research tools
  • Relatively limited number of markets
  • Does not accept US traders
Your capital is at risk Europe* CFDs ar...
  • Multi-asset broker offering a wide variety of markets
  • Strong regulatory framework
  • Innovative risk management tools
  • Choice of market-leading platforms
  • Wide spreads on some markets
  • Expiry date on Demo Accounts
Between 74-89% of CFD traders lose Between 74-89 % of retail investor accounts lose money when trading CFDs
  • Low trading costs
  • Great market flow
  • Research and analysis which helps spot trades
  • Wide range of Copy and Social Trading options
  • Limited range of non-forex markets
eToro Logo77% of CFD traders lose 77 % of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
  • Social and Copy Trading Platform
  • Beginner Friendly
  • Risk-free Demo Account
  • Top-tier regulation
  • Limited means of raising queries
  • Withdrawal process isn’t really ‘client-focused’