Dollar reigns supreme

Clare MacCarthy

Senior Editor, Saxo Bank
Clare MacCarthy first joined Saxo Bank in 2012 to work as a senior editor on TradingFloor.com. Prior to this, she worked as a Denmark-based foreign correspondent for The Economist and the Financial Times and also served as Copenhagen bureau chief for Dow Jones Newswires.

The US dollar continues to ride high this morning following yesterday's battering of the single currency at the hands of a dovish European Central Bank governor. "The two main takeaways here are the significantly higher upgrade to the Eurozone inflation outlook and the expectation of no rate hike before the end of the summer of 2019," says Peter Garnry, Saxo's Head of Equity Strategy. "I think this is structurally negative for the euro and I think the market is surprised by the ECB's take on inflationary pressure," he adds.

The lower euro, of course, is good news for European exporters, and those who will benefit most, Garnry says, are those with major exposure to the US market.

Elsewhere, emerging markets remain under pressure from the stronger dollar as well as the outlook to a series of rate hikes this year as outlined by the Federal Open Market Committee earlier this week. "This is a clear negative and one should be underweight EM equities both on a relative and an absolute basis," Garnry advises.

Commodities too proved very responsive to the stronger dollar, says Ole Hansen, Saxo's Head of Commodity Strategy: "Gold priced in euro made its biggest jump since last September and this could potentially be a precursor for a rise in gold versus the dollar as well."

In the energy sector, the focus remains glued to next week's Opec and non-Opec meetings in Vienna. News emerged yesterday that both Saudi Arabia and Russia will seek to reduce their previously agreed output cap, though the Russians want far more crude oil freed up than the Saudis do. "The problem for the market with this is that we don't know where it'll land," Hansen note.

You can access both of our platforms from a single Saxo account.

Disclaimer

Saxo Capital Markets (Australia) Pty Ltd prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Combined Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)