Ipek Ozkardeskaya
Swissquote Bank Ltd
The US bond and stocks extended their rally on the back of soft US economic data and another strong US bond auction. The US dollar fell sharply against most majors, allowing the euro, sterling, and the yen to extend gains into the year end. The rally in the sovereign space looks overdone, hence the rally in stocks and the selloff in US dollar looks overstretched; there is a rising risk of a wild correction when the euphoria comes to an end.
Because the US has recorded the biggest two-month easing in financial conditions in its history because of the impressive US sovereign rally on rising Fed rate cut expectations. It appears that the latest easing in the US financial conditions has been more powerful than the ones observed following the announcements of the Quantitative Easing programs from the Fed. And the rapidly loosening financial conditions are hardly compatible with a sustainably low inflation… even less so as the geopolitical tensions started to disrupt global trade ways in a way that could be inflationary.
One good news is oil’s inability to ensure a sustained price rise. The barrel of US crude snapped back below the $74pb after testing the $76pb on rising Red Sea tensions.
This report has been prepared by Swissquote Bank Ltd and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Swissquote Bank Ltd personnel at any given time. Swissquote Bank Ltd is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.
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