A busy week lies ahead with a slew of important macroeconomic data, and central bank meetings as well as the ongoing sagas of international trade tensions and sanctions, plus, of course, the corporate earnings season which this week will see Apple's much-anticipated release.
"It's a very busy week for the status of many things and especially the dollar, US yields, and a status check on the Federal Reserve as well," says John Hardy, Saxo's head for FX strategy. The yield on 10-year Treasuries jumped beyond 3% last week (a six-year high) and though it subsequently tipped back lower, it is expected to remain elevated this week, thereby facilitating additional dollar strength, he adds.
Elsewhere, GBP was crushed lower at the tail end of last week by a very weak UK Q1 GDP report and this week will likely extend to the downside with key areas for GBPUSD being 1.3700–1.3750 and then the 1.3600–1.3650.
Meanwhile, equities are in a somewhat confused state – the corporate earnings season is producing strong results but this has failed to lift sentiment, says Peter Garnry, Saxo's head of equity strategy. Investors are increasingly worried about interest rates and macro developments outside the US, he notes. "We remain strategically defensive," Garnry concludes.
But commodities, broadly put, are on a roll and April has show some decent advances, especially for oil which has been boosted by trade tensions and the threat of fresh sanctions in Iran, says Ole Hansen, Saxo's head of commodity strategy. Indeed oil now trades near a three-year high as Iranian and Venezuelan supply worries, along with strong demand, are offsetting a continued rise in the US rig count.
Bond. Long Bond(s)
With real rates being too positive, we see three scenarios: Opportunity to lock in rates at cycle high, government overreach to keep the economy afloat or a complete reset of the economy.
Steen Jakobsen,
Chief Investment Officer
Is a bond bull market ahead? Inflation still poses a risk for investors, but the moment for increasing duration to your portfolio may be approaching towards the end of the year, when central banks might be forced to cut interest rates.
Althea Spinozzi,
Senior Fixed Income Strategist
The furious rate hike cycle has brought gains in the US dollar, but with stagflation risks in Europe and the UK and weakness in the Chinese economy, USD may have more room to run. But a strong dollar could also have repercussions for US growth, emerging markets and commodity prices.
Charu Chanana,
Market Strategist
With the cost of capital rising painfully, stagflation fears are back, illuminating the fragile state of the green transformation, while giving a tailwind to nuclear power, and threatening the growth of AI-related stocks.
Peter Garnry,
Head of Equity Strategy
With supply tightness not only in energy but all commodities, the momentum in commodity prices may continue, pressuring central banks to lower real rates. That could be a good setup for precious metals, including gold, silver and potentially platinum as well.
Ole S. Hansen,
Head of Commodity Strategy
As the pandemic showed, even the US Treasury can experience seismic shifts. With the government increasing the pace of issuing bonds to support fiscal spending, the complex Treasury market and regulatory constraints could spark a liquidity event.
Redmond Wong,
Market Strategist
The tide has turned for bonds. Given the current yields, bonds have become an attractive investment, with added benefits including lower risk than stocks, increased diversification and a steady stream of income unaffected by economic changes.
Peter Siks,
Investment Coach