23 Jul 2014
Risk sentiment prevails in global markets - BTMU
FXStreet (Barcelona) - Lee Hardman, FX Analyst at the Bank of Tokyo Mitsubishi UFJ, notes the growing sentiment towards riskier assets.
Key Quotes
"The high yielding G10 currencies of the Australian and New Zealand dollars have strengthened in the Asian trading session supported by the ongoing improvement in global investor risk sentiment after stronger than expected corporate earnings have helped lift US equities to a new record high overnight".
"Heightened geopolitical tensions linked to developments in the Ukraine and the Middle East have so far failed to materially undermine investors risk seeking behaviour. Financial markets have also continued to remain very stable maintaining favourable conditions for carry trades."
"The release yesterday of the marginally weaker than expected US CPI report for June has also helped to dampen upward pressure on US yields in the near-term from the strengthening US economic recovery providing some further reassurance to global investors that the Fed will remain comfortable to maintain their current dovish policy stance. The report revealed that core inflation increased by a more modest 0.1%M/M in June following a 0.3%M/M increase in May."
"The annual rate of core inflation eased by 0.1 point to 1.9% in June, although core inflation has still run at an annualized pace of 2.2% in the first half of this year which is above the average rate since the middle of the 1990’s. We remain comfortable with our view that inflation remains on track to rise back towards the Fed’s target, and should the labour market continue to strengthen more than expected by the Fed, then it is likely to prompt the Fed to begin raising rates in the year ahead. Developments in Fed monetary policy appear unlikely to undermine the appeal of carry trades in the near-term but pose downside risks for high yielding currencies further ahead."
Key Quotes
"The high yielding G10 currencies of the Australian and New Zealand dollars have strengthened in the Asian trading session supported by the ongoing improvement in global investor risk sentiment after stronger than expected corporate earnings have helped lift US equities to a new record high overnight".
"Heightened geopolitical tensions linked to developments in the Ukraine and the Middle East have so far failed to materially undermine investors risk seeking behaviour. Financial markets have also continued to remain very stable maintaining favourable conditions for carry trades."
"The release yesterday of the marginally weaker than expected US CPI report for June has also helped to dampen upward pressure on US yields in the near-term from the strengthening US economic recovery providing some further reassurance to global investors that the Fed will remain comfortable to maintain their current dovish policy stance. The report revealed that core inflation increased by a more modest 0.1%M/M in June following a 0.3%M/M increase in May."
"The annual rate of core inflation eased by 0.1 point to 1.9% in June, although core inflation has still run at an annualized pace of 2.2% in the first half of this year which is above the average rate since the middle of the 1990’s. We remain comfortable with our view that inflation remains on track to rise back towards the Fed’s target, and should the labour market continue to strengthen more than expected by the Fed, then it is likely to prompt the Fed to begin raising rates in the year ahead. Developments in Fed monetary policy appear unlikely to undermine the appeal of carry trades in the near-term but pose downside risks for high yielding currencies further ahead."