USD and JPY Up, Stocks Down on Risk Aversion As Markets Get Going
Today markets are showing fear in trading ahead of Powell's 2-day testimony, as risk currencies are falling while safe havens are gaining
Yesterday markets were quiet with the economic calendar being quite light, while the US was on bank holiday. Today the calendar continues to be light, although we are seeing some decent price action. albeit it is one-sided, with the USD and the JPY gaining some momentum as safe havens, although Gold is declining, having dipped below $1,930 earlier, after falling from $1,950.
The US stock market is also experiencing a challenging day, with the potential for further heavy selling in the days ahead due to rebalancing flows at the end of the quarter. This rebalancing activity might also be driving demand for bonds today. Investors are expressing concerns about the rapid and significant growth of the market.
At the start of the day, the S&P 500 index was only 8% away from reaching a new all-time high yesterday but has retreated around 80 points lower since then. J.P. Morgan predicts that asset managers and pension funds could sell $150 billion worth of equities by the end of the quarter as they rebalance their portfolios towards bonds. While this figure may not be extraordinarily large, it is sufficient to make people contemplate taking profits in a market that has been consistently rising.
Throughout this month, the prevailing trend has been to buy risk currencies and stock markets whenever there is a dip in the market. However, those buyers seem to be absent today, after the S&P opened with a bearish gap lower at the start of the US session. Despite the selling pressure, the market hasn’t yet returned to the opening level observed on Thursday.
In summary, the US equities market is facing a potentially challenging day, driven by rebalancing flows and concerns about the market’s rapid ascent. This situation has dampened buying interest, although the market has not yet retraced back to its previous opening level from Thursday.
USD/JPY Live Chart
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