Markets are trading with a renewed risk-on bias as sentiment improves following comments from former President Trump at Davos, keeping the so-called “TACO trade” firmly in play. A softer tone around Greenland and tariff-related threats has helped ease geopolitical anxiety, while supportive US GDP and PCE data have reinforced confidence in the broader macro backdrop. Together, these factors are encouraging capital to rotate back into risk assets.
Fundamental Overview
The macro calendar remains busy, with several key releases likely to influence short-term price action. Global Flash PMIs, Bank of Japan policy decisions and guidance, UK retail sales, and US PMI and sentiment data are all due. In the US, resilient growth data combined with easing inflation pressures continue to strengthen the soft-landing narrative. This combination supports expectations that the Fed can remain patient, keeping financial conditions supportive for equities and other risk-sensitive assets.
Beyond scheduled data, markets remain alert to developments around trade policy and geopolitics, but the current tone suggests these risks are being temporarily de-emphasised in favour of improving economic fundamentals.
Risk Sentiment Overview
Risk appetite has clearly improved. US equities are holding firm, with the AI-heavy MAG7 continuing to attract support. At the same time, currency flows are gradually rotating away from the US dollar, reflecting growing confidence in global risk conditions. While short-term volatility around upcoming data releases is likely, the broader sentiment remains constructive rather than defensive.
Technical Overview
Technically, US indices continue to hold above key support levels, reinforcing an upside bias following recent consolidation. The US dollar remains vulnerable to further weakness if risk appetite persists. Gold continues to display a constructive bullish structure, benefiting from USD softness and residual uncertainty. Meanwhile, US oil remains under pressure, with downside risk persisting below the important $58.66 level following recent inventory data.
Overall, the balance of risks currently favours risk assets, with markets increasingly willing to look beyond near-term noise and focus on improving macro conditions.