Despite a further increase in sovereign bond yields, we’ve seen very little change in risk assets in the past few weeks.

While this may be surprising on the surface – after all, yield-sensitive equity sectors like tech have seen quite some hefty underperformance – it goes to show the strength of cyclical equity sectors. Indeed, resilience is also notable in other asset classes: for example, risk on G-10 currencies.

Euro trading higher

The EURUSD is trading higher on the back of softer US yields that have allowed risk asset to breath a touch freer. The EUR is steady this morning, though still not far off its year-to-date lows as the focus remains on the region’s stuttering vaccine roll-out programme.

But this story is becoming far too repetitive in the FX circus. As the EURUSD continues to hold the 1.1850-70 technical line in the sand, the speculative trader’s swill is happy to buy Euros in anticipation of easing European lockdowns early in Q2.

Also, European investors have a little ” PEPP” in their step after the European Central Bank (ECB) confirmed more significant QE purchases, which helped reverse the dreary lockdown sentiment tide and supported the single currency.

Higher volatility for the Turkish Lira

On the Turkey front, the balance of risks for the TRY has shifted towards higher volatility. How much volatility vs “carry” are investors willing to ride where the haze of volatility could be the overriding factor.

Malaysian Ringgit remains under pressure

The Malaysia Ringgit continued to trade on the weaker side of 4.11 yesterday on softer oil prices amid EM risk-off ripples from the TRY sell-off. But with US yields softening a bit and the US dollar generally weaker across the board this morning, the MYR and local Asia FX should trade with a more positive beat today.

Gold finds support above $1720 level

As the US yields story continues to evolve, so does the ebb and flow in gold sentiment. Lower US yields overnight triggered a pullback on some newfound US dollar optimism favourable for bullion prices. Gold remains well supported above $1720 near term pivot but needs sustained break higher before confronting the November 2020 lows near $1765.

In the meantime, gold remains supported by the ongoing Covid-19 stimulus efforts and while it might not be the best near-term speculative game in town, it is still hard to argue against gold as a long-term portfolio diversifier against the abundance of the market unknowns.

Market analysis from Stephen Innes, Chief Global Market Strategist at Axi