The US dollar remained firm at elevated levels during the Asian trading session following a correction lower for risk assets yesterday. The S&P 500 index slipped 2.6%, as the conditions for risk assets dampened, reflected a strong risk-off tone.
Risk assets will find it difficult to gain firm footing as fears over the ongoing spread of the virus continue to mount in the US, particularly in the US states of California, Florida, Texas and Arizona.
Those fears have also been further supported by the announcement that New York and New Jersey have deployed a 14-day quarantine for incoming travellers to reduce further spreading of the virus
Risk sentiment has also been soured by new trade tensions. The US is said to be weighing up tarrifs on USD3.1 billion worth of imports from the EU, targeting products like beer and trucks.
It is therefore clear that risk appetite will be somewhat subdued due to the covid-19 outbreaks in addition heightening trade tensions between the US and EU. Low risk appetite typically leads to less flows into Risk FX (AUD, NZD, CAD), Equity Bourses, Risk Commodities (Oil).