Markets saw limited initial fallout from the joint US/British/French strike on Syria, but with new Russian sanctions levied Saxo Bank head of forex strategy John Hardy says that risk sentiment and geopolitics remain very much front-of mind for investors as we head into a new trading week.
"The risk-linked USDJPY broke minor resistance Friday, but the pair ultimately headed to a soft close with the breakout attempt into the Ichimoku cloud not really holding," says Hardy.
Elsewhere, sterling remains on the FX radar on the currency's recent strength into this week's data releases, most notably CPI on April 18, while Hardy reports that three Federal reserve speakers – non-voters Kaplan and Kashkari and voter Bostic – will be speaking today with possible consequences for USD direction.
While the risk landscape, characterised as it is by fears of major power conflicts in Syria and the developing Sino-US trade war, remains a distinct headwind for equities, Saxo's Peter Garnry says that a "very, very short-term" uptick remains a distinct possibility.
"Risk-reward is bad on equities as European data lead the 'macro disappointment' trend," reports Garnry, adding that Citi's G10 surprise index has declined to levels not seen since June 2017.
In single shares, Garnry says that Tesla sentiment remains negative with sell-side analysts seemingly abandoning the stock in the wake of reports that the firm may be concealing the number of injuries occurring at its factories. As for the corporate earnings season, Garnry says that sentiment on Wells Fargo, Citi, and JPMorgan was soft Friday despite encouraging numbers, a trend that he expects to see continue.
Netflix and Bank of America report earnings today ahead of the New York bell.
Finally, Saxo Bank fixed income specialist Althea Spinozzi reports that US 10-year yields hit 2.83% Friday as the spread between 10- and two-year yields flattened to 46.6 basis points, the lowest level seen since 2007.
On the ratings front, Spinozzi says that Moody's has upgraded Spanish debt to Baa1 while Fitch and S&P maintain an A- rating on the country's bonds.
Outrageous Predictions 2023: The War Economy
- The constantly growing global need for energy drives the world's richest to huddle up and launch a R&D project in a size the world hasn't seen since the Manhattan Project gave the US the first atomic bomb.
French President Macron resignsThe political stalemate in France and the rise of Marie Le Pen following the 2022 elections corners President Macron, forcing him to give up on politics and resign from his position. At least for now.
Gold rockets to USD 3,000 as central banks fail on inflation mandateAs markets and central banks realise that the idea that inflation is transitory is wrong, and that prices will remain higher for longer, gold is sent through the roof, hitting a price tag of USD 3,000
EU Army forces EU down path to full unionWith continued challenges in the region and a US military that isn't aggressively enacting its former role as global policeman, the European Union agrees to create its own armed forces, bringing the whole region closer.
A country agrees to ban all meat production by 2030In an effort to become one of the global leaders on the path to net-zero emissions, one country decides to not only put a heavy tax on meat, but to ban domestic production entirely.
UK holds UnBrexit referendumFollowing a recession and domestic pressure, the United Kingdom is thrown into political turmoil that will end with a vote to wind back Brexit.
Widespread price controls are introduced to cap official inflationHistory tells us that with the war economy comes rationing and price controls. And this time is no different, as policymakers introduce strict price controls that lead to a range of unintended consequences.
OPEC+ & Chindia walk out of the IMF, agree to trade with new reserve assetSanctions against Russia have caused widespread turmoil due to US Dollar moves in countries across the globe that don't consider the US an ally. To relieve themselves from this, they leave the IMF and create a new reserve asset.
USDJPY fixed to the USD at 200 as Japan overhauls financial systemFollowing the challenges that faced the Japanese Yen in 2022, the Bank of Japan attempts to keep the currency from sliding. Unsuccessful on the long-term, Japan will launch a reset of its entire financial system.
Tax haven ban kills private equityWith the war economy comes an increased focus on national interests and sovereign nations' ability to assert themselves. In that regard, the OECD countries turn their attention on tax havens and pull the big guns out, banning them altogether.