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BER Newsletter, Feb12 2018

Categories: Newsletters

Hi there, during a week which saw global equity markets suffer their largest losses in two years and broader market volatility pick up, foreign exchange markets were surprisingly calm.
A flight to safety benefitted the US dollar, which finished higher against a basket of currencies for the second consecutive week; and the Japanese yen, which at one point on Friday threatened the major technical level of 108 per dollar. Meanwhile, bitcoin appeared to find a bottom at $6,000.

The Pound investors were unnerved on Friday when the EU’s chief Brexit negotiator, Michel Barnier, warned that a transitional deal between the EU and the UK was “not a given,” as some investors had come to believe. GBP fell in response to Barnier’s comments from levels close to 1.40 to 1.3765, before settling for the week down 2% at 1.3825.
The Euro tested as low as 1.22 against the US dollar (EUR/USD) Friday before a bout of dollar profit-taking drove the price back up to 1.225 for a loss on the week of 1.7%.
US Dollar was strong as traders piled into dollars during the Dow Jones’ 1300-point fall last week (the index was down more than 2,000 points on both Wednesday and Friday) as the relative safety of the US currency outweighed a downward revision to US interest rate expectations.
The Aussie was in favour as the markets responded to the Reserve Bank of Australia’s (RBA) quarterly statement on monetary policy. The RBA continues to anticipate a pick-up in Australian economic growth over the next two years.
The Kiwi continues to be encumbered by the Reserve Bank of New Zealand (RBNZ) slashing their forecasts for growth and inflation at their latest monetary policy meeting – a decision that further dimmed market hopes for a rate hike in 2018.
Bitcoin’s rise amid a stampede away from risky assets appears at first to be wildly paradoxical given its notorious volatility, but the move in fact supports claims that cryptocurrencies are an asset class of their own, independent of any individual country or company, which can therefore act as a haven during difficult times for the broader market.
For the full story please read our article here.

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