The mood in financial markets changed for the worst last week resulting in a stronger Dollar and a 4.3% correction in global equities. Concerns about a second-wave of covid-19 cases in a number of countries, including the US, Korea, Singapore and Poland, ongoing civil unrest in the US and other major cities (including London) and the ongoing onslaught of mostly bleak macro data seemingly conspired to dent global risk-appetite.
The US Dollar, on a downward trend since mid-May, appreciated almost 1% in trade-weighted last week, despite or arguably in part because of the Federal Reserve’s bearish forecasts for the US economy. The Dollar has inched further higher in the past 48 hours. Unsurprisingly perhaps the safe-haven Swiss Franc outperformed, appreciating 1.3% last week.
The more risk-sensitive Sterling and Kiwi Dollar both weakened about 0.7%, with Sterling buffeted by the release of data showing a record collapse in GDP in April of 20.4% mom. The Australian Dollar was the underperformer, weakening twice as fast, and it has lost further ground since Friday. In trade-weighted terms it is currently trading at its weakest level since end-May.
