Despite America’s comparatively high interest rates, the US dollar has remained persistently weak since the start of the year – with the US dollar index hovering near its three-year low of 88.44. Whilst dollar weakness potentially reflects concern over the US’s fiscal sustainability, it is likely to add further stimulus to an already robust economy.
10-year Treasuries touched 2.944 last Thursday – reaching a new four-year high. This was powered in part by CPI readings on Wednesday which gave a higher-than-expected inflation rate of 2.1%.
The Vix index is a measure of volatility for the S&P 500 – calculated by the difference of “put” and “call” options market prices. The recent increase in volatility has sent the index soaring – a troubling omen for future market turbulence.
In spite of concerns over higher interest rates – which should depress the appeal of stocks – the S&P 500 has rebounded nearly 8% from its four-month low a week and a half ago. Investors however, remain extremely uncertain as to the future of US stocks given the rapidly changing policy environment.
Crude oil reached $61 on Friday, yet still remains down by about 2% compared to a year ago. A buoyant global economy has so far failed to significantly elevate the price of crude, which has been haunted by the spectre of oversupply: the US is forecasted by many to become the world’s largest crude oil producer this year.