A daily summary and commentary of events and factors that affect the global markets, with a particular emphasis on the foreign exchange markets.
Rearview Mirror Perspective
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David Atkinson Foreign Exchange Sales Manager
A former colleague of mine started his newsletter this morning by saying, “The Fed has made clear they are driving the bus looking only in the rearview mirror.” Which of course led me to think, “I had better get a coffee for this.” Fed Chair Jerome Powell continued the great American victory tour at the Economic Club of Washington yesterday, touting the same message he emphasized on “60 Minutes” last Sunday — that the country has turned the corner and the economy is recovering, but we are still not thinking about raising rates (OK, that last phrase is my interpretation of what he said). The U.S. central bank seems to have fortified the bunker it will use to weather the “temporary inflation” storm rolling in, but outside of that they are full-steam ahead.
The FX podcast for the week will be on the global business of music rights and the various forms those take. Preparing for it has led me to wonder what the music technology was the last time the Fed was something other than the No. 1 or No. 2 influencer of daily market movements: Compact discs? Vinyl? Cassettes? Eight-tracks? At a minimum, this speculation makes for a fun weekend conversation.
The expected eternal summer of economic good times continues, with strong global equities and bond yields relatively in check for now. The U.S. 10-year yield is below 1.60% for the first time in a month.
In the currency world, the Russian ruble is a notable loser after the announcement of sanctions from the Biden administration in response to the SolarWinds network hack and past interference in U.S. elections. Currency winners today include most currencies connected to the commodities we see in the reflation trade — Aussie and New Zealand dollars, South African rand, etc.
There have been and continue to be a slew of bank earnings these days. The headline is that banks are killing it. In many ways that is true, but there is also the release of reserves banks had stashed away last year when a wave of bankruptcies was expected in the wake of the economic carnage of the pandemic. For the most part that didn’t happen thanks to federal government money and programs. Now let’s see how 2021 goes for the financial sector.
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