Demand for Havens Wanes as Sentiment Picks Up

Market sentiment analysis:

  • Trader confidence is improving as market fears about the coronavirus have receded, boosting demand for riskier assets at the expense of safe havens.
  • However, as the death toll rises, it is possible that risk aversion will return.

Traders shift carefully out of safe havens

Traders have become modestly more optimistic about the economic impact of the coronavirus, moving out of safe havens and into riskier assets. However, the flows so far have been small and it is hard to argue that the previous “risk off” mood will not return.

As the chart below shows, the move up in AUD/USD, for example, needs to be seen in the context of the previous tumble in the Australian Dollar, which is seen widely in the markets as a proxy for China as the two economies are so closely linked.

AUD/USD Price Chart, Daily Timeframe (October 29, 2019 – February 4, 2020)

Chart by IG (You can click on it for a larger image)


Data provided by

of clients are net long.

of clients are net short.

Change in Longs Shorts OI
Daily 5% -5% 3%
Weekly 37% -24% 19%

Elsewhere, GBP/USD has steadied after Monday’s concerns that the EU and the UK are digging in ahead of the upcoming Brexit talks.

In this webinar, I looked at the trends in the major currency, commodity and stock markets, at the forward-looking data on the economic calendar this week, at the IG Client Sentiment page on the DailyFX website, and at the IG Client Sentiment reports that accompany it. You might also like to check out the DailyFX Trading Global Markets Decoded podcasts.

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— Written by Martin Essex, Analyst and Editor

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