Risk assets stage a big comeback, US dollar now the laggard on the day as CAD gains

There was nothing in particular to spur the huge turnaround in markets.

Sentiment bottomed right at the close of European stock markets at 11:30 am ET. Since then we’ve seen an impressive rally in everything and the S&P 500 is back to flat and the Nasdaq is up 1%. It started with short-covering in some beaten up stocks but it’s broad now and powerful.

It’s well beyond stocks with oil now flat and bitcoin up $6000 from the lows.

In FX, there is a big shift towards selling the US dollar, even as Treasury yields jump from the lows. The US dollar is now the worst G10 performer on the day, trailing even CAD.

One catalyst was a big spending proposal from Germany, which has immense untapped fiscal space. That may be a sign of things to come in China and elsewhere as the world confronts the chaos in the US.

Alternatively, market participants could be bottom fishing on hopes/expectations that the tariffs are short lived.

Looking at the USD/CAD chart, there is a clear double-top at 1.4540 in the past two days. That could argue for more selling.

This article was written by Adam Button at www.forexlive.com.