US Secretary of State Tony Blinken warns of possible attack on Israel by Iran and Hezbollah as tensions escalate. Market reacts with gold price (XAU/USD) trading 0.71% lower at $2,425.
Understanding Risk Sentiment in Financial Markets
During periods of “risk-on”, investors are optimistic and willing to buy risky assets. In contrast, in a “risk-off” market, investors play it safe and opt for less risky assets. This can impact stock markets, commodities, currencies, and cryptocurrencies.
Major currencies like the US Dollar, Japanese Yen, and Swiss Franc tend to rise in “risk-off” markets, while currencies like the Australian Dollar, Canadian Dollar, and New Zealand Dollar thrive in “risk-on” environments due to their reliance on commodity exports.
It is essential to understand risk sentiment in financial markets to make informed investment decisions and navigate market volatility effectively.