For the time being, investors have put on the back burner US-Sino trade tensions in favor of turning their focus to bullish for risk post-pandemic reopenings headlines across the globe. Japan ended its nationwide state of emergency yesterday, Spain wills top enforcing mandatory quarantine for foreign tourists from July 1. England will start to re-open all non-essential retail shops from June 15, and Dubai will revive its economy and ease lockdown travel from May 27.
And with mobility trackers flashing green as major urban centers around the globe are the unambiguous leaders when it comes down to auto congestion, public transit, and going to work. With the stock market mapping in a straight line to the second derivative of the mobility data, which is pointing to a considerable increase in foot traffic by the day, global stock indexes are soaring.
The Euro
Assuming there is no imminent second virus wave, the COVID-19 recovery in Europe looks set to be much faster than in the US, aided by a more extensive social safety net. Initiatives such as the Recovery Fund are also boosting sentiment. A counter-proposal from the EU's so-called 'frugal four' (Austria, Denmark, the Netherlands, and Sweden) rejects the idea of grants. Still, bund spreads narrowing, suggesting that fixed-income investors do not see the group of four's opposition as material and which is equally suitable for the Euro higher.
There is even evidence supporting the long EUR/USD scenario in a sharp reversal in economic data surprises vs. the US (currently around all-time lows). Signs from flash PMIs already point to a strong bounce from the lows, more similar to the PMI data mapped by China than the tepid one seen in the US thus far.
The Australian Dollar
AUD/USD is trading constructively with firm risk-on sentiment after China attempted to satisfy concerns regarding Hong Kong's judicial autonomy, and optimism that preparations to re-open economies are gaining momentum. S&P 500 Futures traded above 3000 for the first time since early March. Hang Seng and Nikkei also printed decent gains. The Aussie dollar high beta to US risk appeal wins out all day long in the game of Axis and Allies.
The Yuan
USD/CNH took another leg lower but is lagging the broadly weaker dollar as the market remains concerned about relations with China and the US.