As risk-off is retreating, focus on the next risk-off factor! "Key points and event schedule for May 11"

Despite surprising employment statistics last week, stock prices remained firm, and the three major U.S. indices rose.

It seems that the bottom of the economic slowdown caused by the coronavirus is becoming visible, which may be contributing to a retreat in risk-off sentiment.

Today too, we are watching whether stock prices will rise as risk-off subsides and whether the trend of yen selling will continue.

One of the risk-off indicators, the VIX index, is also stabilizing.

Looking at stock prices and the VIX index, it seems we are returning to pre-COVID-19 conditions.

◎ Today's Points of Focus

1) Turkish Lira

The Turkish lira is under currency depreciation, and a sharp drop could occur at any time.

Today, Turkey's quarterly unemployment rate will be released; depending on the results, it may trigger another decline.

Also, last week Turkey halted trading of the Turkish lira for three banks, including Citigroup, UBS, and BNP Paribas.

As a result, liquidity of the Turkish lira has decreased and spreads have widened.

In Japan, new orders cannot be placed on OANDA, and Rakuten Securities has issued warnings regarding Turkish lira trading suspensions.

What other brokerages will do, and how holders of Turkish lira positions will react to those actions, are points to watch.

2) U.S.–China Relations

There are increasing critical remarks between the United States and China.

Whether this will remain only criticisms or move into a tariff war again is something to watch closely.

Trump's approval rating has fallen due to the economic slowdown and the spread of the virus, affecting his chances in the presidential election.

Therefore, he seems intent on blaming China for the coronavirus.

There were rumors of lawsuits to hold China accountable economically, but they don't seem realistic.

Instead, there is pressure to implement the contents of the first phase of the U.S.–China agreement.

China's trade volume has also decreased due to the coronavirus, so it remains to be seen whether they can fulfill the agreement.

◎ Today's Event Schedule

May 11 (Monday)

08:50 JPY Bank of Japan monetary policy decision meeting—main opinions (for April 27)

16:00 TRY Turkish quarterly unemployment rate

19:45 EUR Merle ECB Executive Board member remarks

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