We see a mildly stronger U.S. dollar (USD) ahead...
A key U.S. dollar index has depreciated roughly 7% this year. Some are betting on further declines; speculative short positioning is at three-and-a-half year highs in the futures market. We believe this positioning buildup led to an April break in the usual positive correlation between the USD and the U.S. yield premium over other developed markets. Yet we see the USD’s broad uptrend since mid-2014 slowly resuming as monetary policy divergence re-emerges. The Fed is normalizing rates while the European Central Bank and Bank of Japan maintain easier policies, and the positive correlation between the USD and yield premium has returned.
Read an excerpt of Richard Turnill's weekly commentary below, or
view the entire BlackRock weekly investment commentary here.
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We see a modestly higher U.S. dollar ahead. This supports the case for non-U.S. stocks, and we see resilience in emerging market (EM) equities.
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The Bank of England (BoE) increased rates for the first time in 10 years, and European stocks hit a ten-year high on upbeat eurozone growth data.
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U.S. President Trump plans to visit China this week, as part of a multi-country trip in Asia. We expect trade and North Korea will be in focus.
Review the complete commentary here, including an evaluation of eurozone, Japanese and emerging market investments.
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