The US dollar tends to appreciate during two broad economic regimes. One is when the US economy is materially outperforming its global counterparts, attracting capital looking to benefit from the superior US prospects. The other is when growth slows sharply, attracting safe-haven-seeking capital. This is the “dollar smile” model of the currency, and looking at 2022 through this lens suggests some dollar strength may be in store.
Digital assets saw considerable inflows in recent years as investors searched for alternative sources of return amid excessive equity and bond valuations. We expect this momentum will continue next year as regulators increasingly approve easy-to-access cryptocurrency exchange-traded funds (ETFs). Still, global regulatory challenges persist, and cryptoassets will remain highly volatile until there is more clarity on future regulation.
Risk assets sold off in November as pandemic-related developments introduced new uncertainties to the economic outlook.
Capital markets performance was mixed in third quarter, with muted gains or losses across many asset classes.
The polarizing and often misunderstood cryptoasset landscape has grown exponentially in recent years. This paper reviews some of the space’s pressing issues, considers cryptoassets in a portfolio setting, and offers some considerations of different implementation options.
Risk-on sentiment returned in August as the global economic recovery continued, albeit at a slowing pace.
Fiscal year 2021 saw a continuation of the strong rebound in risk assets, which had commenced in second quarter 2020. This was facilitated initially by positive news from COVID-19 vaccine trials, and then ultimately by their gradual rollout, which established a path back toward economic normality. Meanwhile, both fiscal and monetary policy remained at extremely accommodative settings.
Cryptocurrencies have made headlines in 2021 as prices have surged, but opinions on cryptocurrencies within the financial industry remain decidedly split. Supporters argue cryptos are a new “digital gold,” whereas detractors view cryptos as little more than a “digital tulip.” Considering this debate, the first quarter 2021 edition of Research Digest features three papers discussing cryptocurrencies.
The onset of the COVID-19 pandemic caused steep declines in risk markets in first quarter 2020. Safe-haven assets, such as core sovereign bonds and gold, performed strongly during this period and have held on to much of their gains. Large-scale intervention by both monetary and fiscal authorities eventually put a floor under risk markets, driving rapid recoveries and pushing equity markets to new highs.
This chart book examines historical currency momentum, valuation, and fundamentals in nine key currencies—US dollar (USD), British pound (GBP), euro (EUR), Swiss franc (CHF), Japanese yen (JPY), Australian dollar (AUD), New Zealand dollar (NZD), Canadian dollar (CAD), and Singapore dollar (SGD)—to help investors understand how these currencies behave against other major currencies.