Tensions between the US and China ratcheted up a notch, fuelling concerns of a resumption in a trade war between the two trading giants and of further headwinds to a recovery in global GDP growth. But this did not stop global equities’ march upwards, with the All-Country-World Index notching a 3.7% gain and hitting its strongest level since early March.
Buoyant global risk appetite fed through to the “safe-haven” Dollar which depreciated for a second consecutive week, shedding a further 1.4% in trade-weighted terms to its weakest level since mid-March. The Federal Reserve and other major central banks would argue that this is also evidence that wide-ranging measures to boost Dollar supply and liquidity – and ultimately ensure that Dollars are available in sufficient quantity to all economic agents – are working.
The Euro inched 0.6% higher last week with markets seemingly welcoming further details of the post-covid European Union recovery fund. It flagship component is a €750bn fund, to be made up of €500bn of grants which will be paid out to EU member states in most need (and will not have to be repaid) and €250bn of loans. The details still need to be ironed out with EU member states and the big question remains whether and when the European Commission and Parliament will get the green light from EU leaders.
The Australian Dollar was the outperformer. It gained 1.4% to its strongest level since end-January, fuelled in part by a more upbeat Reserve Bank of Australia in the context of a fall in domestic covid-19 cases. The Kiwi Dollar jumped about 1% last Tuesday but then trade sideways to end the week up only 0.7%.
Sterling and the Swiss Franc were broadly unchanged.
