The US dollar reigns supreme across the board, with the recent worries about trade wars apparently being shrugged off amid stable to higher US yields and strong risk appetite in major equity markets, says John J Hardy, Saxo's Head of FX Strategy. "This environment is generally supporting the dollar and USDJPY has bounced back higher," he says. Although new GDP numbers from New Zealand matched market expectations, the kiwi has joined its Australian and Canadian peers by weakening to new lows versus the mighty USD. Other beleaguered currencies include those of emerging markets which are under increasing pressure because of the greenback's strength, country-specific political hurdles and the fact that many of them carry heavy loads of dollar-denominated debt.
Equities in developed markets are continuing their run higher while those in the EM space are mixed, with Brazilian banks a rare overachiever having posted gains of 7%-8%, reports Peter Garnry, Saxo's Head of Equity Strategy. That said, a long list of casualties elsewhere include South Korean stocks (the worst-performing equity market since the trade war started) as well as Germany's Daimler (owner of Mercedes-Benz) whose SUV models sales are taking a hit from Chinese tariffs.
In commodities, gold and metals are generally trading lower in response to the rising dollar and higher yields after Fed chief Jay Powell confirmed the outlook to higher US interest rates, says Ole Hansen, Saxo's Head of Commodity Strategy. "The developing trade war is likely to weigh on business confidence and could force central banks to downgrade their outlooks," Hansen adds.
Finally, the much awaited Opec and no-Opec series of meetings in Vienna continue to capture headlines with the latest news being that the cartel
seems to moving towards an agreement to raise crude oil production in order to replace lost barrels from Venezuela and others, Hansen concludes.
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.