Currency war remains the main focus

It feels that currencies are currently driving all the asset classes. A weak dollar is certainly spurring a strong commodity market, across the board. Bond markets still remain strong as intervention by the US to keep yields lower is continuing the QE process. Equity markets are still quite strong, as volumes are low and corporate news relatively healthy.
The problem with a weak dollar is it’s adversely effecting exports in other economies, which need export stimulation to promote growth. So these nations have been and will be forced to intervene to sell their own currencies.
And this war is likely to continue until QE ends, at which point the markets should sort themselves out.
It is difficult to get excited right now about the markets as they are ultimately strangled by existing and pending intervention; however intervention, in my eyes is more of a stalling process as opposed to remedial process; so as always the markets will move again. In the meantime, equities, bonds & commodities remain strong; precipitated by a weak dollar. When (if) the dollar reverses and strengthens then corrections are inevitable.


About Simon Brown
Simon Brown has over 20 years experience trading Derivatives on everything from Gold, FTSE to Dollar/Pound. Simon has lectured in Trading Psychology, Strategy and Technical Analysis, in addition to regular appearances on CNBC television. He is now Managing Director of ProSpreads.

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