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The US Dollar outperformed its major counterparts this past week. Looking at the chart below, the Japanese Yen was the worst-performing major currency followed by the New Zealand Dollar and then the Chinese Yuan. USD/JPY is a pair that tends to be quite sensitive to the direction of Treasury yields, which have been on the rise lately.
Meanwhile, the Chinese Yuan was already looking overbought based on a model I constructed to look ahead for the coming few quarters. Markets spent much of this past week focusing on unwinding dovish Federal Reserve policy expectations. This was emphasized by Tuesday’s unexpectedly strong US CPI report.
Gold was another notable underperformer last week considering the combination of a stronger US Dollar and bond yields. All things considered, equity markets were relatively…