US Dollar leads markets
It’s all about the US Dollar this week as the currency continues to strengthen, dominating equities, rates and commodities.
It’s the main reason behind the rally in European equity markets – up over 10% since the beginning of the year. And it’s also contributing to the Nikkei 225 rally, which is now above 19,000 for the first time in 15 years.
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Wealth Know How is the online network helping people manage their wealth through financial education. Whether you are looking for simple ways to better manage your cash, or you are after a complete strategy on how to save for retirement, we can help you understand your options. It is important to have a vision for your future, but its knowledge not dreams that will ultimately deliver financial success.
Published on 18 Mar 15
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It’s all about the US Dollar this week as the currency continues to strengthen, dominating equities, rates and commodities.
It’s the main reason behind the rally in European equity markets – up over 10% since the beginning of the year. And it’s also contributing to the Nikkei 225 rally, which is now above 19,000 for the first time in 15 years.Sponsor - Wealth Know How
Wealth Know How is the online network helping people manage their wealth through financial education. Whether you are looking for simple ways to better manage your cash, or you are after a complete strategy on how to save for retirement, we can help you understand your options. It is important to have a vision for your future, but its knowledge not dreams that will ultimately deliver financial success.
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Venezuela tension heats up
Duration 03:16
-
Aussie dollar surprises market
Duration 03:10
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Markets climb as investors watch US healthcare bill
Duration 02:31
It’s the main reason behind the rally in European equity markets – up over 10% since the beginning of the year. And it’s also contributing to the Nikkei 225 rally, which is now above 19,000 for the first time in 15 years.
This is because the stronger US Dollar has improved the earnings outlooks for European and Japanese companies. Rather than using lower prices to capture market share, these companies are more likely to keep prices stable and book higher profits – hence the current rally in these markets.
The stronger dollar has also put a cap on commodity prices, with Iron Ore trading below $60 and Oil losing its recent gains.
It has also prompted speculation the US Federal Reserve won’t increase rates in June, although the word "patient" has been removed from its statement.
Recent economic data has added to this speculation. This includes the larger than expected fall in retail sales; inflation; and consumer confidence.
We think the rate hike will still go ahead in June as the US economy is self-sufficient. That said, the US futures market is only pricing in a 20% chance of it happening.
Recent economic numbers out of Europe haven’t been much to write home about, but they have been stronger than expected. This has helped support the upward trend of European equities.
Greece remains a problem of course. It’s difficult to see how Greece can resolve its issues without devaluing its currency. In our view, the chances of Greece exiting the Eurozone are now greater than 50%. The possibility of Greece’s exit will help maintain downward pressure on the Euro against the US Dollar as well.
Data out of China last week was disappointing and we believe the slowdown in activity at the start of 2015 may be even sharper than the figures suggest.
Policymakers in China are likely to keep responding with further reductions to reserve requirements and interest rates, as well as a stepped up pace of infrastructure spending. China also announced that if the economy is not growing at a rate sufficient to create enough jobs they still have many options to boost growth.