Clare MacCarthy
Senior Editor, Saxo Bank
News that the European Union and the UK had agreed on a 21-month Brexit transition deal propelled sterling higher yesterday but some gains were subsequently lost as doubts crept in. Sterling faces a difficult week between today's CPI, tomorrow's Bank of England meeting, and the EU summit in Brussels on Thursday and Friday.
"Expect a weak Swiss franc and strong sterling if the pound survives the next few days," says John Hardy, Saxo's head of FX strategy.
Meanwhile, the US dollar has edged back lower ahead of tomorrow's Federal Open Market Committee meeting, with markets almost 100% certain that a rate hike will be announced. "I'm not sure what the driver is here, of course we don't know what Powell is going to say, but my general stance is that he's not going to want to be very specific on guidance. So while the market is discussing whether we'll see two, three or four hikes [this year] I think Powell won't want to be tied down to too explicit a forward guidance. The takeaway will be on intangibles – his demeanour, his stance and his answers in the Q&A," Hardy says.
In equities, meanwhile, the story of the week (and probably longer) is the technology shakedown which saw the Nasdaq 100 fall 2.2% yesterday, driven by Facebook, which is under scrutiny because of the Cambridge Analytics data misuse allegations. "Facebook shares fell 7% and the hashtag #deletefacbook is spreading rapidly on the internet. This has the potential to have a severe impact on engagement numbers," warns Peter Garnry, Saxo's head of equity strategy.
In commodities, "we're seeing a bit of a two-way market with crude oil trying to break to the upside and industrial metals looking heavy to the downside," says Ole Hansen, Saxo's head of commodity strategy. Crude’s breakout attempt is supported by high Opec compliance on tumbling Venezuelan production and Middle East security concerns (Saudi Arabia vs Iran and US sanctions return). Against it is the rising risk of a demand growth-killing trade war, weaker stocks and rising US stocks, Hansen says.
Finally today, in precious metals, the tech rout has paused the gold and silver selling we've seen the past few days in the run-up to the Fed meeting. But there's no end yet to the problems of grains and soybeans which remain troubled after their recent protracted buying spree.
AI: The good, the bad, and the bubble
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Steen Jakobsen,
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Peter Garnry,
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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,
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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,
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Mads Eberhardt,
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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,
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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,
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