The U.S. dollar overnight staged a rebound, which has been carried through into early trading on Wednesday, after being hit heavily in the session of Tuesday.
It comes as fiery rhetoric continues between the U.S. and China, there are worries regarding the U.S. response to China’s proposed security law for Hong Kong. President Donald Trump said on Tuesday the United States would announce before the end of the week its response to China’s planned security bill for Hong Kong.
China on Wednesday morning further responded and said they will take necessary countermeasures on foreign interference in Hong Kong.
Latest reports note that protesters in Hong Kong rush on to the main street in Kowloon with the demonstrations escalating.
The markets had been very much risk-on so far this week, as thanks to the optimism regarding the large slowdown of Covid-19. However, this can change in a heart-beat, given the sensitivity around the U.S. and China. The markets are perhaps waiting to see how the legislation plays out and then the response from the U.S.
What does this mean for the market?
Given the strong tone and foundations laid by the markets this week, it appears the theme of risk appetite wants to continue its dominance. The riskier currencies; AUD, NZD, CAD, EUR, GBP keeping cautiously bullish this week, until markets have judged the severity of a U.S. response on China.
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