Financial markets exhibit continued volatility, influenced by trade uncertainties, fluctuating news cycles, and evolving currency relationships. Francesco Pesole, FX analyst at ING, highlights ongoing risks for the US dollar and commodity-linked currencies despite nascent signs of optimism. The USD’s safe-haven status is being tested amid heightened equity volatility and recent bond sell-offs. US equities experienced significant intraday fluctuations following unsubstantiated reports of a potential tariff moratorium, which were subsequently refuted by President Trump, who also threatened increased tariffs on Chinese goods. The S&P 500 ultimately closed marginally lower. Commodity currencies have demonstrated a notable overnight recovery, with the Australian and New Zealand dollars outperforming despite tariff-related concerns. This performance may be attributed to the People’s Bank of China’s decision to fix USD/CNY above 7.20, signaling a bearish outlook for the yuan and potentially alleviating pressure on proxy currencies. A detailed analysis of the CNY situation follows.
