Has the financial storm been weathered smoothly?

Has the financial storm been weathered smoothly?

On the second trading day of this week, gold rebounded at an accelerated pace, in tandem with the rise of the US dollar. The long-end prices of US Treasuries remained stable, indicating that the short-term selloff by dollar capital has come to an end, and risks in the financial markets have eased.

At the same time, the high volatility in risk markets caused by liquidity issues and deleveraging pressures has been alleviated. Gold is no longer being viewed as the primary target for selling to obtain liquidity in the short term.

Overall, the short-term risks in financial markets have decreased, which is a positive sign. However, although US stock futures remain on the rise and the VIX index is stable around 16, risk appetite has not fully recovered before the market open.

At this stage, the financial markets are in a recovery phase. Liquidity is temporarily flowing back to gold, followed by the US dollar and US Treasuries. Due to yesterday’s unexpectedly optimistic US manufacturing data, some funds flowed into low-beta, high-yield blue-chip stocks in the US stock market.

This has led to a situation where, although the market is recovering in the short term, risk appetite has not fully returned. It remains a phase of cautious optimism. Liquidity needs to stabilize and repair safe assets before confidence in the risk investment market can gradually increase, ultimately driving the rise of high-beta risky assets, such as tech stocks and Bitcoin.

For participants in the cryptocurrency market, it seems that a dangerous period has passed. What follows is waiting for the market to regain confidence and new liquidity inflows to drive prices higher, or for positive catalysts that could stimulate sentiment in the risk market to emerge.