Sterling has been blasted lower after Bank of England governor Mark Carney cast doubt on a previously pretty-much-expected UK May rate hike. The European Union's rejection of Britain's latest Brexit-Irish border plan only served to deepen the rot. "The sterling rally is pretty much done and dusted," says John Hardy, Saxo's head of FX strategy.
"The most volatile currency this week has been GBP. Carney was trying to peddle the message that while he does see rate hikes out in the future, there is also weakness in the UK economy," Hardy adds.
For sterling, these factors mean that poor sentiment will persist pending "something very dramatic" on the Brexit front.
Elsewhere, the Australian dollar is reversing lower against it US counterpart, but higher against the kiwi while the greenback itself is perking up on the back of weakening risk appetite and higher US bond yields.
Meanwhile, over in equities, Saxo Bank head of equity strategy Peter Garnry says that the situation surrounding the beleaguered Rusol aluminium producer "has been catapulted to the highest level". US sanctions against Russia are preventing the company from selling its wares and this is beginning to have a negative impact on the global car industry, especially in Europe.
"In a worst-case scenario this could have a material impact on European growth," Garnry says.
AI: The good, the bad, and the bubble
While a deep recession may not be iminent thanks to central bank policy, interest rates will have to stay high for longer, and this will be accompanied by volatility risk from the unwinding of bubbles, especially within AI.
Steen Jakobsen,
Chief Investment Officer
The emergence of advanced AI systems is by far the most surprising event this year, turning everything upside down, while risks and benefits are debated. AI will also become an arms race between the US and China.
Peter Garnry,
Head of Equity Strategy
As China navigates global fragmentation, its cycle of technology application, productivity enhancement, and growth is threatened by US breakthroughs in generative AI, limited computing power, and geopolitical tensions.
Redmond Wong,
Market Strategist
Japan’s expertise in semiconductors and robotic integration could be the foundation of AI dominance. Combining two of this year's themes, Japanese equities and artificial intelligence, brings a wave of opportunities.
Charu Chanana,
Market Strategist
The AI fever has turned the technology into a darling, pushing crypto further into no-man’s-land. There are striking similarities between AI and crypto, and if these are to come full circle, AI won't be spared for bubbles.
Mads Eberhardt,
Cryptocurrency Analyst
Stocks related to artificial intelligence (AI) have appeared on investors' radars. Expectations are high, but it may be necessary to consider how to get exposure to AI in a diversified way.
Hans Oudshoorn,
Trainer Academy
The USD is on its back foot as markets celebrate an eventual Fed rate peak and steady long US yields. The stakes are even higher for the Japanese yen if longer major sovereign yield curves have to price in economic acceleration.
John J. Hardy,
Head of FX Strategy
While commodities, broadly speaking, have faced some tough months, a partial reversal during June could signal that the asset class is getting back on its feet with energy holding up and precious metals with upside potential.
Ole S. Hansen,
Head of Commodity Strategy
As inflation remains high central banks face hard decisions about whether they should keep hiking interest rates or stop. Meanwhile, the rise of AI creates bubble-like conditions that only make the decision harder.
Althea Spinozzi,
Senior Fixed Income Strategist