Global equity markets extended consecutive daily losses this week with the exception of a few minor bourses, as the Dollar surged upwards. US and European treasury yields push higher, and the Dollar maintains its upwards trajectory. Against the Euro the Dollar breached new highs of the year, and the Yen couldn’t hold off the advancing greenback either. Rising US rates are the critical driver against the Yen as the Dollar touched highs last seen in June last year. From the UK to across the globe in Australia and New Zealand, the Dollar exhibited strength against the majors.
Comments provided by JP Funds.
One of the highlights of the week came on Thursday with the speech from the FED. A key point from the speech was the lack of concern of the expectant rise in the rate of inflation. From the FED standpoint the excessive inflationary pressures are temporary, with their sights set on aiding the recovery of the labour market. Market reaction was an immediate spike in US Treasury yields. Any assessment by the FEB to stem the rise of inflation by curbing the risk-free rate would be unexpected. The message from the FED rhetoric was clear that higher levels of inflation will be tolerated before any changes will be considered in the monetary policy.
Looking to the week ahead, it is the ECB meeting which stands out. The fact that German factory orders data was nearly three times stronger than anticipated bodes well for the Eurozone. Upcoming German industrial production figures for January are projected to contract for the quarter though. Compared to the US, the EU economic recovery over the past months had been weaker. Since the start of the year the common currency is trading 2% lower against the Dollar and declined by 3% against the Yuan, the currency of its largest trading partner. The question now is what the ECB is willing to do about it.
Glossary: What is FXMC
FX Multi Core (FXMC) is a balanced, diversified portfolio from a number of different strategies, the portfolio is distributed across 4-5 trading styles which execute to its own risk/reward profile. The strategies are traded actively, and the allocations are monitored by strict risk management procedures to control trading exposure, drawdown levels, leverage and position limits.