Behind the Rally in Emerging Markets Currencies

The video discusses the current market rally, comparing it to pre-Brexit levels and analyzing risk sentiment. It explores the risk ratio in relation to the S&P 500, highlighting the appreciation of emerging market currencies. The impact of the Fed's tightening on the US dollar and Treasury yields is examined, noting the shift towards currencies with potential capital appreciation. The British pound's performance and the Bank of England's QE challenges are analyzed, along with upcoming UK economic data. Finally, the video delves into the Japanese yen's role in carry trade and its market implications.

What is the significance of the JP Morgan emerging market Currency index in the context of the economic rally?

• It indicates the level of central bank liquidity.

• It measures the strength of the U.S. dollar.

• It tracks the appreciation of EM currencies and risk sentiment.

• It predicts the future performance of the S&P 500.

Why might investors be drawn away from the U.S. dollar towards other currencies?

• The Federal Reserve's easing policies.

• Greater potential for capital appreciation in other currencies.

• Stronger economic data from the U.S.

• Higher yields in U.S. Treasurys.

What challenge is the Bank of England facing with its QE program?

• Balancing trade deficits.

• Increasing interest rates too quickly.

• Finding sufficient longer-dated gilts to buy.

• Managing inflationary pressures.

How has the Japanese yen's role changed in recent months?

• It has become a stronger gauge for risk appetite.

• It is no longer used in carry trades.

• It has appreciated significantly against the dollar.

• It is now a proxy for global stock performance.

What recent economic data point was unexpectedly high, affecting the Japanese yen?

• Machine tool orders.

• Unemployment rate.

• Inflation rate.

• Consumer spending.