Americans and Britons returned from their long weekend holidays refreshed and eager to take on risk. Lockdown restrictions implemented across the globe to combat the COVID-19 pandemic are easing. U.K. and American beaches were packed. British Prime Minister Boris Johnson told reporters on Monday that non-essential retailers, which include outdoor markets and car dealers, can start reopening beginning June 1.
Traders pushed China/U.S. and China/HK tensions to the back burner. China is President Trump’s favourite "whipping boy" to help bolster his re-election prospects. China’s planned crackdown on Hong Kong protesters, fueled risk aversion last week but those fears were overshadowed by the improved outlook for global economic growth as world economies start to reopen.
Asia equity traders liked what they heard and by the major indices closed with gains, led by a 2.6% rise in Japan’s Nikkei 225 index. Those gains led to higher prices for European equity indexes. S&P 500 futures are pointing to a strong open on Wall Street today.
FX traders were pleased as well. AUD/USD soared, rising from $0.6540 in Asia to $0.6633 in Toronto trading today. However, the sustainability of the gains is questionable due to the ongoing China/Australia dispute. China levied tariffs on imports of Australian barley and some meat products to show displeasure at Australia’s call for a COVID-19 inquiry.
NZD/USD followed AUD/USD higher as traders dismissed concerns that the Reserve Bank of New Zealand would adopt negative interest rates in the future.
USDJPY is chopping about inside the 107.00-108.00 range that has contained prices for the past week.
The rebound in U.S. Treasury yields supports prices, but gains are capped thanks to comments from Bank of Japan Governor Haruhiko Kuroda, suggesting more monetary stimulus measures are possible.
EUR/USD rallied from $1.0894 in Asia to $1.0972 in Toronto. The easing of lockdown restrictions in Europe combined with last week’s Germany/France proposal of an E.U. COVID-19 relief fund supported prices. Yesterday’s improved German IFO data is also a factor.
Bank of Canada Governor Stephen Poloz delivered a lecture at the University of Alberta yesterday. He did not announce any new policy initiatives but warned that future monetary policy decisions face "unparalleled uncertainty" because of the measures used to fight the impact of the pandemic. Traders will be looking for insight from his appearance before the Standing Senate Finance Committee on National Finance today. Senior Deputy Governor Carolyn Wilkins will join him.
New Home Sales, Case-Shiller Home Price Index, and Consumer Confidence reports are being released in the U.S.. The Canadian calendar is empty.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
