Big questions for markets this week

  • A disappointing US employment report for April doused market chatter about a possible summer interest rate increase from the Federal Reserve.
  • In the absence of significant wage gains and a presidential election looming in November, the US central bank may well find itself stuck on the policy sidelines for 2016.
  • A number of analysts believe the great dollar bull run has ended, given how the currency has struggled in recent months. Such weakness, however, means the dollar probably has limited downside from present levels.
  • The interest rate differential still remains in favour of the dollar versus its major rivals. US Treasury debt is a sovereign high yielder when $7.5tn of European and Japanese government paper is in the negative interest rate world.
  • Further evidence of weaker US growth in the coming weeks has the potential to fuel renewed concern over the global economy and that could well bolster the dollar as a haven.
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