BUZZ-COMMENT-FX Traders Should Think About Risk, Not Rates
January 14 (Reuters) – Traders who view the level of risk appetite as more important than the direction interest rates might take should fare better in the coming year.
Soaring inflation has triggered a wave of monetary policy tightening, but this has not derailed the underlying positive bias in financial markets, where the huge stimulus that has been rolled out is expected to continue to operate. magic.
Rather than falter in the face of rising interest rates, equities and commodities soared and risky emerging market currencies gained.
This extremely powerful positive trend is likely to continue as the terminal rate envisaged for US interest rates in this tightening cycle is relatively low at around 2.5%, while rates in the Eurozone, Switzerland and Japan are expected to stay much lower.
Interest rates for free-floating currencies such as the South African rand, Mexican peso and Czech koruna are already higher and are expected to match, if not exceed, any rise in US rates. Carry trades against funding currencies such as the Euro, Yen and Swissy could prosper.
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(Jeremy Boulton is a market analyst at Reuters. Opinions expressed are his own)
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.