Currency wars usd yen bitcoin and what it means to you
What can be taken for granted is that: Regardless of the conclusion one might derive from this chronology, the unusual comments made in January look like a breach of the so-called Shanghai agreement of February , when G20 leaders were said to have agreed to stabilise currency markets after a strong two-year US dollar appreciation.
The recent tax reform voted by the US Congress has some similarities with those two episodes: However, both in the s and in the s, fiscal support was provided right after an economic recession and was meant to accelerate the economic recovery.
Today, the US economy is in the 9th year of its expansion cycle, and at full employment. Whether this difference will make for a different outcome this time remains to be seen.
As seemingly ever-better growth indicators continue to accumulate in the Eurozone, the debate around inflation has become topical on this side of the Atlantic too. However, as deflation concerns have now dissipated and inflation rates now seem set on an upward, if mild, trajectory going forward, all eyes turn toward the ECB.
At least that is the perception of financial markets, that are increasingly pricing an end of the asset purchase program and ultimately rising short term rates.
Upward pressure is not only visible on long-term interest rates: Inflation really is topical at the beginning of Yes, the very economy that has been plagued with a year long deflation. No such obvious cause this time, even if favourable base effects on energy prices may play a role.
The improving economic backdrop in Japan certainly supports a gradual improvement in the inflation picture, despite still strong structural headwinds. This could be seen as a clear signal that the BoJ is happy to take advantage of the current improving picture to consider withdrawing some of its policies, with negative externalities for the Japanese financial system.
Or it could simply mean that, for city-dwellers such as Mr Kuroda or Mr Mnuchin, the altitude of Davos loosens their lips possibly more than they would like. US dollar weakness certainly has had a role in supporting prices over the period. The strength and acceleration of the global economy has also supported the demand side of the equation.
But supply-side factors have also driven this rise in prices. The growth in the world oil supply has slowed down after the surge recorded in , after OPEC eventually agreed on a supply cut and low prices shut some US shale producers out of business.
As a result and quite noticeably, oil prices have been rising in even as inventories have been drawn down. US inventories, that had almost doubled from to early , have declined over the remainder of the year. This is maybe the best indicator that the large imbalance between supply and demand at the root of the oil price collapse in has now been resolved.
If true, oil prices should become less prone to big price shifts in the future. Besides geopolitical risks, the two main drivers of the gold price are the US dollar and US long-term real rates, which have an historically inverse relationship with the precious metal.
Recently, the rapid and strong depreciation of the US dollar has clearly overtaken the relatively subdued increase in US real rates. Going forward, the evolution of gold prices is likely to remain torn between the two forces - a lower US dollar or higher US long-term real rates.
If you believe US real rates will rise meaningfully, you should stay away from gold, but if you believe in the continuation of a weaker US dollar and a muted increase in US real rates, gold could shine again. Historically, there is a positive correlation between rising interest rates in the United States and a stronger US dollar.
The BoJ left its policy unchanged, while in parallel noting an improvement in inflation expectations contributing to the JPY rally. In addition, in the last year, the South African economy has recovered from negative growth and high inflation. Meanwhile, investors are expecting that the country will avoid another credit rating downgrade in March. The surge in volatility in early February took the market by surprise.
The move was the biggest ever, 20 volatility points from Friday close to Monday close although VIX spot traded higher during the night and killed a number of strategies, including the infamous XIV. The Japanese currency still has not reached heights of So it has space to move up. It means that the growth of the Japanese currency cannot affect the possibility of the normalization of the monetary policy as soon as this year. To sum up, we can say that too strong currency is always not good for the economy and a central bank tries to loosen it.
However, the strength of the yen is a controversial question. On the one hand, we can see the strong appreciation of the yen against the US dollar. On the other hand, in general, the yen growth is not so strong. The last consolidation resulted in a massive bullish rally.
Finally, the price faced resistance at 1. Next callback request for this phone number will be available in The most important things to start trading Enter your e-mail, and we will send you a free Beginner Forex book. We've emailed a special link to your e-mail.
Click the link to confirm your address and get Beginner Forex book for free. Update it to the latest version or try another one for a safer, more comfortable and productive trading experience. Where will the yen's strength lead? However, as we know, it cannot be only one point of view. Bloomberg To sum up, we can say that too strong currency is always not good for the economy and a central bank tries to loosen it.
The Australian dollar started its downward movement at the end of January … trade wars aud. The euro has been plunging for a week and already reached its February lows… eur europe. I accept Customer Agreement conditions and accept all risks inherent with trading operations on the world financial markets.
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