USD retains the upbeat while NZD and AUD depreciate sharply, as market lowers its risk appetite due to concern over equity valuation and volatility

•  US Dollar gains as the equity market turmoil spreads
•  NZDUSD and AUDUSD sharply lower, investors seeking safety
•  GBPEUR rate accelerates the rise as German consumer confidence plunges

US Dollar extended gains against most currencies as investors remain cautious on the stock market rout. Excessive valuations and maniac on stocks such as Gamestop boosted demand on safe harbors such as USD. Other worries that investors may have include corporate earnings, delays in COVID vaccinations, possibility of hedge funds squeezing out of short positions, and the likelihood that other similar stocks would follow the pattern on Gamestop. These have all fueled the risk aversion mood. Meanwhile, the Fed decided to keep monetary policy unchanged as expected but they did signal some concern over the pace of economic recovery. The advance release of US Q4 GDP will help the market test this concern. Forecast is currently at 4.0% on a QoQ basis.

In APAC, Asian equity index futures are pointing mostly lower following the volatility from the Wall Street. Wednesday’s session saw Hong Kong’s Hang Seng index close 0.32% lower, while mainland China’s Shanghai Composite struggled for a small 0.11% gain. In Japan, the retail sales in December landed at -0.3%, down a full percentage point from the previous month. New Zealand Dollar and Australian Dollar are depreciating quickly against the US Dollar, primarily linked to the shift in the investing mode as NZD and AUD are both risk-favored currencies. However, for how long this shift is going to stay still remains unclear.

In Europe, GBPEUR rate is trading higher, after Germany’s data showing that consumer confidence continues to fall, potentially extending into February. The current figure plunged to -15.6 from -7.5, well below the forecast at -7.9. Most importantly, data show that consumers have become less willingly to spend money, which could further hamper Germany’s economic recovery.