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.
Quarterly Outlook Q2 2022: The End Game has arrived
- Shocks from covid and the war in Ukraine have forced the global financial and political world to change, but what will the end game be?
Productivity and innovation have never been more importantAs the world economy hits physical limits and central banks tighten their belts, could equities be facing a 10-15% downside?
The great EUR recovery and the difficulty of trading itIf the terrible fog of war hopefully lifts soon, the conditions are promising for the euro to reprice significantly higher.
Tight commodity markets – turbocharged by war and sanctionsWith supply already tight, commodities keep powering on. But will it last for yet another quarter?
Between a rock and a hard placeGeopolitical concerns will add upward price pressures and fears of slower growth, while volatility will remain elevated.
The Great ErosionInflation is everywhere and central banks try to combat it. But will they get it under control in time?
Australian investing: Six considerations amid triple Rs: rising rates, record inflation and likely recessionWhile global financial markets are struggling in an uncertain world, the commodity-heavy Australian ASX index is poised to keep a positive momentum.
Cybersecurity – the rush to catch up with realityWith the invasion of Ukraine, governments and private companies are rushing to reinforce their cyber defenses.