A chunky shift in market sentiment is being observed, following solid one-directional flows into the risk assets. The likes of AUD, NZD, GBP, USD, CAD, riskier FX versus both USD and JPY had been enjoying strong trends given the supportive fundamental tone.
Why did the tone change?
In terms of a technical perspective, it had been somewhat overdue, as markets do need corrections following dominating moves. On the fundamental front, some renewed concerns are garnering attention:
German lockdowns
Coronavirus infection numbers in the country have been on the rise in recent weeks. The number of confirmed coronavirus cases in Germany jumped by 17,482 to 2,629,750, according to data from the Robert Koch Institute (RKI) for infectious diseases, as released on Friday.
To combat this German Chancellor Merkel detailed that for five days from April 1, Germans are to stay at home and reduce contacts as much as possible. Big family gatherings will be banned over the holidays, with no more than two households, or up to five people, being allowed to meet.
It is now expected that the extension of Germany’s lockdown measures would delay a much-hoped-for recovery in Europe’s largest economy from spring until early summer.
Vaccination troubles
There are higher tensions between the U.K. and the European Union as the 27-member bloc is considering restricting exports of Covid-19 vaccines across the English Channel.
They are becoming largely frustrated at the UK’s AstraZeneca (NASDAQ:AZN) for not respecting its delivery targets to the Eurozone.
The pharmaceutical firm reduced the number of vaccines it will deliver to the EU twice in the first quarter and once in the second quarter. As a result, European officials become worrisome that any future issues could undermine their vaccination targets.
All of this has harmed the market’s appetite for risk and now very much supportive of the needed correction anyway, inviting those flows back into safe-haven FX; USD, and JPY.