China propels risk-on mood amid sluggish markets, crude rallies

Market sentiment improved on Tuesday as China eases quarantine limits for international travelers, as well as announced readiness to battle the economic challenges arising from the coronavirus and the Russia-Ukraine crisis. Mixed US data and a light calendar also add strength to the risk appetite.

With this, the US dollar struggles for clear direction around a one-week low. However, firmer US Treasury yields favor USDJPY buyers whereas NZDUSD and AUDUSD fail to cheer the risk-on mood amid challenges for the RBNZ and the RBA’s rate hikes.

The firmer sentiment joined headlines suggesting a supply crunch to provide a double-barrel boost to the oil prices. Gold, on the same line, also consolidates the previous day’s losses.

Cryptocurrencies aren’t left behind as BTCUSD and ETHUSD print daily gains for the first time in three.

Following are the latest moves of the key assets:

• Brent oil rises for the fourth consecutive day, up 0.70% at around $116.30.
• Gold reverses the previous day’s losses around $1,830, up 0.25% intraday.
• USD Index remains pressured near 104.00 after two-day downtrend
• FTSE 100 marks 1.20% intraday gains but STOXX50 and DAX are both up around 0.60% by the press time.
• Wall Street closed with mild losses even after beginning the week on a firmer note.
• BTCUSD rises 0.9% to trade around $21,000 while ETHUSD rises more than 1.50% as bulls keep reins past $1,200.

Is it quarter-end positioning?

Although updates from China and receding fears of the central banks’ aggression appear as the key catalysts behind the latest optimism, the traders remain skeptical amid fears of the bear’s return after the quarter-end positioning gets over. It should be noted that a lack of major data/events, as well as the market’s anxiety ahead of the key central bankers’ debate at the ECB Forum also challenge the bulls.

That said, China’s reduction of quarantine time for the international travelers joins the hints for qualitative measures to tame economic risks to bolster the risk-on mood of late.

On the same line were the previous day’s mixed US data, with firmer Durable Goods Orders battling the downbeat sentiment figures.

It should be observed that the latest reduction in the interest rate futures suggesting softer rates than a week ago also contribute to the market’s anxiety. Furthermore, cautious mood ahead of today’s US CB consumer sentiment gauge and headlines suggesting the G7 preparations for more sanctions on Russia, as well as a tough stand on China, try to chain the optimists.

Elsewhere, BTCUSD and ETHUSD bears take a breather after a two-day downtrend as traders await market recovery after a long south-run since April.

⏫ 🟢 Strong buy: USDCAD

⏬ 🔴 Strong sell: Nasdaq, silver, ETHUSD, Brent oil

⬆️ 🟢 Buy: USD Index, USDJPY

⬇️ 🔴 Sell: DAX, FTSE 100, gold, BTCUSD

US CB Consumer Confidence, central bankers in focus

Having witnessed mild optimism, or probably the corrective pullback, in the market sentiment, global traders may await US consumer sentiment figures and comments from the ECB, BOE and the Fed policymakers. However, major attention will be given to Wednesday’s ECB Forum as the leaders of the US, the UK and European central banks will debate monetary policies then.

Hence, today’s data/events may help prepare traders for the next day’s volatile markets and hence the outcome should be considered short-term until witnessing any strong hints.

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