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Dollar Remains Key Driver of Risk

The US economy was the main driver of momentum in markets last week as the optimism from payrolls slowly wore off. The US dollar was a focal point for commodities as certain currencies hit multi-year lows. Central Banks are in an increasingly difficult position as easing measures fall short of expectations and fail to achieve their targeted goals. Worsening macroeconomic data is not foreshadowing an improvement in global trade conditions in the near-term.

Last Week in Brief

The US dollar hit new multi-year highs after carrying over momentum from the previous week’s employment numbers. Aside from multi-year highs in the dollar, USDJPY managed to touch new highs not seen since before the last financial crisis, as the Nikkei 225 managed to surpass 19,000 for the first time since the year 2000. Copper prices rose modestly, even though the newest growth targets released by the Chinese Central Government were cut from 7.50% in 2014 to 7.00% for 2015. Gold fell briefly below $1150 per troy ounce before rebounding on the dollar pullback; but more interesting was the renewed pressure on crude oil prices. The ECB was relatively successful in its first week of quantitative easing; but it is already running into headwinds as supply of assets will likely not satisfy the ambitious targets.

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The Week Ahead

The week ahead will be dominated by data from the United States, with the upcoming industrial production figures, Philadelphia Federal Reserve Manufacturing Index and US building permits set to be released. Of no less importance is the Euro Area CPI numbers, which are due to be released on Tuesday. Expectations are for the core number to remain in positive territory year over year, while the all inclusive figure is forecast to contract at a rate of -0.30% on an annualized basis. Friday will see the release of similar data from Canada with year over year inflation data expected to remain in positive territory. Other important events include unemployment numbers from the United Kingdom and GDP figures from New Zealand.

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