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The response of the US dollar and Treasuries to Israel's attack on Iran and the palatable risk of escalation was uninspiring. It supports the popular narrative about the changing role of the US dollar and assets
Week Ahead: Geopolitics, Tariffs, And Central Banks
Summary
- The response of the US dollar and Treasuries to Israel's attack on Iran and the palatable risk of escalation was uninspiring.
- Late last year, the 30-day rolling correlation of changes in the exchange rate and the two-year US-German rate differential was above 0.80, a multiyear high.
- The Bank of Japan is wrestling with trying to normalize monetary policy while the economy remains weak (-0.7% quarter-over-quarter contraction in Q1), and inflation remains elevated.
- Sterling was lifted to new three years highs last week, not by constructive developments in the UK, where the data mostly surprised on the downside but broadly weaker US dollar.
- The US dollar's broad movement appears to have eclipsed other influences on the movement of the Canadian dollar.
Marc Chandler has been covering the global capital markets in one fashion or another for 25 years, working at economic consulting firms and global investment banks. A prolific writer and speaker he appears regularly on CNBC and has spoken for the Foreign Policy Association. In addition to being quoted in the financial press daily, Chandler has been published in the Financial Times, Foreign Affairs, and the Washington Post. In 2009 Chandler was named a Business Visionary by Forbes. Marc's commentary can be found at his blog (www.marctomarket.com) and twitter www.twitter.com/marcmakingsense