A temporary suspension of the 145% tariff on Chinese consumer electronic imports and the 10% flat rate tariff provided a boost to global markets on Friday. This development facilitated gains in Asian and European equities, as well as positive movement in US equity futures.
The USD maintains a weak bias, despite the equity market recovery. While bonds have strengthened alongside stocks, resulting in a 5-6 basis point decrease in Treasury yields, Japanese government bonds underperformed, with long bond yields increasing by 4 basis points. Crude oil prices have risen, but concerns regarding excess supply persist due to diminished global growth forecasts.
Despite the stock market rally, the USD continues to exhibit weakness, trading lower against most currencies, with the exception of the CHF and KRW. High-beta and commodity-linked currencies are outperforming, driven by improved risk appetite. Short-term risk reversal pricing for the Bloomberg dollar index indicates a significant decline in USD sentiment, with put options trading at a historically high premium relative to call options, excluding periods of pandemic-related volatility.
