In this week's IDB, 'Market volatility remains elevated', Pau Morilla-Giner, Chief Investment Officer, discusses the 'Tricky Trio'; US Dollar, Oil and Chinese Renminbi.
- Markets remained choppy last week with risk assets under pressure. The price of crude continued to be volatile, but weak data releases increased market concerns of a slowdown in growth. Investors retreated to safe haven assets with gold experiencing its strongest week of gains in two years.
- US manufacturing survey data for January was better than last month, but continued to signal a contraction in activity, the services survey dipped lower, indicating a slower pace of expansion. Friday's headline non-farm payroll release disappointed, delivering 151k new jobs versus an expectation of 190k, although wage and unemployment numbers were slightly more encouraging.
- Disappointing US data releases have delayed market expectations of the next Fed rate hike with only one increase expected this year. Last week, Fed officials Dudley and Fisher acknowledged a tightening of financial conditions would factor in future Fed decisions.
- Mario Draghi cemented expectations of more European Central Bank (ECB) support at the next meeting by warning that the risk of delaying outweighed those of acting too early.
- This week, investors will closely watch Janet Yellen’s testimony to Congress for direction on the path of Fed policy, alongside US retail sales data released at the end of the week.
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