Swine flu or no, it seems like the market is in a mood to assume risk. AUD/JPY, a closely watched risk metric, is a good deal firmer this morning and EUR/USD is underpinned as well. The market seems to have grown comfortable with the swine flu outbreak, to the extent that it does not see a major long-lasting economic impact, as yet. How it has come to that conclusion is anyone’s guess, but that seems to be the take over the last 24 hours. Ambrose Evans-Pritchard has similar concerns, apparently.
Q1 GDP from the US is due in 60 minutes. A drop of between 5-6% on an annualized basis would surprise no one. Given recent signs of stability, the market will likely quickly begin to look forward after a knee-jerk reaction.
1.3300 and 1.3320 are resistance levels near-term. Markets will likely be reluctant to push too much further to the topside until the FOMC is out of the way this afternoon.
