Michael McKenna
Head of Editorial Content, Saxo Bank
The latest weekly report from the US Energy Information Administration delivered what Saxo Bank head of commodities strategy Ole Hansen calls "a trifecta of bullish news" for crude with WTI surging to resistance at $63.15/barrel.
"Stocks are down, production is flat, and exports are surging," notes Hansen, adding that the rally in WTI brings prices to the 61.8% retracement of the January-February selloff. "If we break through this level, we can say that we have established a bottom," Hansen concludes.
Gold, meanwhile, has endured its worst week since early December on the back of a stronger USD and a hawkish federal Open Market Committee, but in Hansen's view the US rate hike calendar is not necessarily gold-negative given the metal's history of quick recoveries from rate rises.
"Expectations for four rather than three 2018 rate hikes are growing, but the hikes are not really the issue as far as gold is concerned; instead, it's the speed of the hikes," says Saxo's commodities head.
In forex, Saxo head of FX strategy John J Hardy reports that the dollar remains stable following a suite of massive US Treasury bond auctions totaling $279 billion. "Demand for Treasuries remained within range despite the massive size of the auctions, so we see a broad lack of concern on the greenback," he notes.
Despite the dollar's strength, USDJPY fell lower Thursday with the yen now trading at some remove from broader market movements. "It feels like the market may be reassessing some its assumptions on the Japanese currency," says Hardy, "adding that in his view the yen remains "quite cheap".
One way to play the strong yen trend is through EURJPY, where prices are currently sitting at the 200-day moving average, with Hardy noting that a break of this level could see a pronounced move lower.
Finally, next week sees a key event for USD and FX in the form of Federal Reserve chair Jerome Powell's address to Congress Wednesday.
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