Weekly Market Outlook | 07.04.2017

Fed fine tunes its monetary policy.

Markets continue to move without core drivers instead jumping from short-term themes. In the US, the Fed introduced the idea of tightening without adjusting only interest rates but rather managing its massive balance-sheet. This strategy will have effect on different parts of the yield curve but limited spillover into USD. Supporting our long-held view that USD dominance is the incorrect strategy for 2017. In addition, weak NFP and subdued wage growth indicate that “hard” US points to a slowdown and will keep the Fed sidelined for much of the year. Surging German industrial production highlights trend of economic improvement globally and should keep emerging markets asset in demand. Finally, as we close in on the French election there is increasing likelihood of a spike in volatility as uncertainty and risk remains elevated. Yet, fundamental background remains solid, providing investors with an opportunity to reload long risk trades.