US | US Dollar to regain some luster in 2021
While many commentators have been calling for a US dollar collapse, we believe the greenback will have a lot of staying power in 2021. In the wake of
extra-ordinary fiscal stimulus, favorable growth and interest rate differentials
should support a 3% year-over-year dollar appreciation by December 2021.
What you will learn about:
- After a predictable appreciation on safe haven flows and US dollar liquidity shortages in the early phase of the Covid crisis, the dollar fell back appreciably against emerging markets and advanced economies’ currencies.
- This unwind reflected less favorable growth and monetary policy differentials, along with reduced political uncertainty after the presidential election and a risk-on trade.
- We believe the third Covid phase will be one of nuance for the US dollar.
Eurozone: ECB minutes indicate that July rate hike is a near-certainty
The minutes from the April ECB meeting confirm the hawkish tilt initiated a few months ago continues to gain momentum. With a majority of the council increasingly concerned about the inflation outlook, this makes an interest rate hike already in July almost certain. This should not come as a surprise, however, as recent developments render hawks' case arguably easier to make.Find Out More
For how long will Japan’s households support bonds and the yen?
Households' financial surpluses sharply increased in 2020 and remained high in 2021 due to the Covid pandemic. Most of the surplus continued to go to cash and deposits, but there was a notable increase in funds going to investment trusts (with a large portion invested in foreign equities) in 2021. Amid rising international yield differentials and a weakening yen, there is market chatter about whether this is the beginning of a structural shift from households' risk-averse investment style?Find Out More