The last week was relatively calm in the markets overall - equities across the globe continued to push higher and yields were broadly lower in developed markets & mixed in EM. One exception was NZ, where equities were down 2% on the week and the NZ Dollar gained 1% after the central indicated a possible rate hike in 2022. There were plenty of qualifiers from the Governor about the uncertainty of predictions given how quickly things can change with the pandemic but with little else to focus on, the market did react notably. Turkey also shed 2% on the week after President Erdogan continued his dismantling of the independence of the central bank by replacing another deputy governor by decree. The Turkish lira also slid 1.7% on the week but may be becoming increasingly immune to such actions.
Asia was more active with the Chinese renminbi making multi-year highs by dipping below the 6.4 mark against the US dollar. The policy response of the central bank has been under scrutiny but they seem to be staying away from any active intervention for now. The latest statement said they believed the currency was overbought and that tapering in the US and other developed economies will lead to a correction soon (via capital outflows). The other source of volatility in recent times - Bitcoin, trended lower through the week to trade around the 35k level currently. Increased regulatory focus around the world seems to be a limiting upside for now.The virus situation looks to be improving with India registering a six week low in daily cases and the US reopening stadiums to sports fans. The latest vaccine data has shown that despite Asia's early success in tackling the virus (and probably because of it), they have struggled to keep up with the West in the progress of the vaccination drive. This would likely cause a near term headwind to Asian growth which was expected to outperform this year.Markets are closed in the US and UK today but we have an eventful week ahead with the PMI data coming out globally over the next couple of days - China's official PMI this morning held no surprises. We also have central bank rate decisions from Australia and India with both expected to stay the course. Being the first week of the new month, we also have the Non-Farm Payrolls (NFP) data in the US to close out the week where 650k new jobs are expected to have been added in May, taking the unemployment rate below 6% for the first time since the pandemic hit.
May 31, 2021
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