So far in 2023, markets have seen strong demand for risk assets which has kept the greenback on the ropes. Equities have risen across Europe but also in the US and Asia. Bond markets have also seen relatively solid demand which has supported the theme of ‘peak inflation’, which ties in with the notion of global interest rates almost arriving at their terminal levels, i.e. the highest they will reach in this cycle of tighter monetary policy.
In the currency markets, the US dollar has found it hard to maintain its footing. Despite the US economy’s outperformance relative to Europe and Asia, the buck has weakened against its major peers with the pound and euro encountering strong inflows this week.
Participants will now begin to focus on tomorrow’s US inflation reading which will likely set the course for the dollar in the short term.
Written by Viv Savani. 8:03am, January 11th 2023
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