FX Market View #34 Markets see reprieve since last week’s COVID sell-off

The financial markets slid lower last week as the Dollar picked up the slack and pushed higher. As per normal, the greenback is the ‘go-to’ currency when markets absorb bad news. In this situation, it was once again COVID that was the major contributor towards declining markets. However, concerns were not only limited to Europe entering a fourth wave. Instead the capital markets were shaken by the discovery of a new strain, which is potentially more contagious. In the currency markets only the Swiss Franc and Japanese Yen were able to match the Dollar in terms of strengthening. This initial reaction can be seen as safe haven buying, however any position unwinding will see buying in the funding currencies.
&nbsp
Looking ahead the markets will seek decisive actions from policy makers on how they plan to manage the economy with rising COVID cases. Two years ago when the pandemic initially started, policy makers decided on full lock-downs to stem the growth of the virus spreading. When dealing with this fourth wave nations are seeking to vaccinate as much of the population as possible, as well as pushing for a booster jab. Travel restrictions are also in place with the view to limit introducing the new variant. However, a full lock-down again will halt any signs of an economic recovery with many industries still nursing injuries. Last month the market views towards a BOE rate hike, and Fed tapering seemed likely in the face of inflation. This week the outlook has softened.
&nbsp
Fortunately, the forecast going into December is not all doom and gloom. The rate of decline behind the global equity markets last week is reducing. Both the European STOXX 600 index and the US Nasdaq 100 Futures were trading slightly higher. Therefore, on the positive side the new trading week has begun on a surer footing, however volatility is much lower with signs of market uncertainty. In this respect the Dollar has given back some of its gains since the weekend, to the Dollar bloc currencies and Scandies. A recovery is also underway among the emerging market currencies, along with the global benchmark yields. On the other hand the softer Euro is dragging the central European currencies lower.

FX Multi Core (FXMC) is a balanced, diversified portfolio from a number of different strategies, the portfolio is distributed across 4-5 trading styles which execute to its own risk/reward profile. The strategies are traded actively, and the allocations are monitored by strict risk management procedures to control trading exposure, drawdown levels, leverage and position limits.