1. Greenback Slides
That’s right, the Dollar dipped lower yesterday following Jerome Powell’s comments about a patient monetary policy strategy in 2019. With inflation stable, investors are welcoming the pause in the rate hike cycle to give the markets some much-needed breathing room to adjust to a crazy few months.
During the Wild West sell-off from October-December last year, the Dollar became somewhat of a safe-haven, outpacing its peers and even gold at one point as volatility went through the roof. The Dollar index appreciated 4.3% in 2018, but the prospect of a prolonged pause in rate hikes has made analysts turn bearish on the Dollar.
Their view is that the slowdown in global growth will prohibit the Fed from hiking rates again in 2019. This leaves the potential for an even greater softening in the Greenback, so long as inflation stays manageable within the target range.
For now, the markets can breathe a sigh of relief and ice some of the bruises from a rough few months. Confidence has tentatively returned to equity markets as developed and emerging markets alike benefited from positive developments in the trade talks. Long may it last!
2. Rupee Roller-Coaster
Roller-coaster doesn’t even really cut it. Perhaps pinball is a more accurate description of the Rupee’s back and forth movements between the worst and best-performing Asian currency.
In the space of two weeks India’s currency has gone from the worst, to the best, to the worst again, giving long-term investors a serious headache. Instead, investors are piling into the Chinese Yuan, Thai Baht and Indonesian Rupiah as trade talk optimism and a pause in the rate hike cycle boosts emerging markets across the board.
The Rupee was left unloved thanks to a strong rebound in the price of oil (India’s top import) and an expensive bailout for farmers ahead of general elections in May.
Oil’s wild price fluctuations have exposed India’s dependency on it for growth, and with more OPEC supply cuts in the pipeline, there may yet be another loop for the Rupee to endure.
India also faces domestic uncertainty regarding the ruling party’s ability to hold onto power ahead of the next general election. Investors are worried that the government may widen its fiscal deficit to gain back some popularity by spending their way back into the people’s good books.
Either way, we’re all in for quite a ride in 2019!
Today we are watching…
1. General Electric (#ge)
General Electric seems to have turned its fortunes around in 2019 after a vicious 56% drop-off in its stock price last year. Having started the planning process for its healthcare IPO and reduced the risk of a liquidity crisis, GE is looking far more promising. Analysts have even upgraded the outlook from negative to positive. Keep up the good work, GE.
2. Electronic Arts (#elecarts)
Electronic Arts has been mounting an epic comeback this week, rising 12.95%. Having taken a 25% beating in 2018 thanks to the delayed release of Battlefield V, and the growing popularity of battle-royale games, the firm is set to boost its 2019 performance with two important games. Battlefield and Anthem will be the company’s best hope of diverting players back to EA and analysts are feeling positive about its prospects.
