As most people recover from holiday hangovers, the financial markets across assets and regions become more anxious. Last quarter was one of the most one-sided trades in favour of the USA.
Within them the major one was the dollar index rising by almost 8% the most since July 2022, this has impacted many countries negatively. This resulted in countries liquidating part of their forex reserves and US Treasury holdings. The liquidation impacted the bond yields especially the US 10-year yield which is up 21% despite a 1% rate cut.
The coming days are crucial for the global economy and financial markets as tariffs along with other concerns enter reality from anticipation. The first of them is a technical default by the USA on its debt by mid-January as per US Treasury estimates. This might push yields as it would cause its volatility index (MOVE) to spike.
The next major event will be the new President taking office and the actions that are taken within the first week of office. And to close the month will an FOMC meeting that has estimated only two rate cuts this year.
These events are crucial for all asset classes across the region and the level of anticipation coming to reality. This would impact the volatility of dollar and local currency assets that would eventually impact the valuations and set the base for the quarter.
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