QuiCQ 21/05/2025
Greenback in the Red
“The dollar is like a check written on an overdrawn account.”
— Karl Otto Pöhl
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Turbo note on the back of a tight agenda a non-event day in financial markets …
Whilst European equity markets ticked in yet some more gains, US equities showed weakness across the board. On the S&P 500 about double as much stocks declined than advanced, in what felt like a healthy breather after a stunning rally not only since the market bottom on April 9th, but also over the past six, relentless upside sessions:
Sector-wise only three sectors managed to close in the green and all three of them are counted in on the defensive side, highlighting the “risk off” theme of yesterday’s session:
Bond yields in the US and Europe firmed slightly yesterday, though the really story lays in Japan, where the 30-year JGB yield is seeing a runaway rally:
Don’t be fooled, whilst 3% and change does not seem a lot, it is the highest since Bloomberg has data all the way back in 2000:
We have written about this in the last Quotedian and it is likely to be a centre piece in one of the upcoming weekly newsletter, but this has potentially very disruptive power… stay tuned!
First area of impact of course are currencies, and the USD/JPY is reacting to the shrinking interest rate differential:
Remember, our 12-18 months target for this currency pair is well below 120 …
But not only against the JPY is the USD showing weakness again:
Please also take reference to today's chart of the day in this context …
Lastly, crude oil prices rose to the highest level in a week after CNN reported that new US intelligence suggested Israel is preparing for a potential strike on Iranian nuclear facilities:
Despite the initial rally having fizzled out slightly, the overall technical picture for oil (WTI) seems to be improving:
Early this Wednesday morning most Asian markets are printing green, with the exception of Japanese stocks. European and US futures point to a flat to mildly lower opening to the cash trading sessions later on.
Time's up, more tomorrow - May the trend be with you!
How much more downside for the Greenback? Let me pull a figure out of my … hat, and say 30%.
30%?! Yes, 30%!
This would bring the US Dollar back to about fair value, even not overshooting a lot to the downside (which of course it may):
I repeat: Stay tuned …
