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Stocks Risk Rally Overshadows EURUSD Monetary Policy Reversion

Stocks Risk Rally Overshadows EURUSD Monetary Policy Reversion

John Kicklighter, Chief Strategist

Talking Points:

  • Risk trends are once again taking the market wheel back from relative monetary policy as a dominant driver
  • Alongside a sharp equities rally; Yen crosses, emerging market and high-yield debt assets shared impressive gains
  • ADP employment, Brazil's rate decision and Australian 4Q GDP are Wednesday's top scheduled event risk

See the DailyFX Analysts' 1Q forecasts for the Dollar, Euro, Pound, Equities and Gold as well as our favorite 2016 trading opportunities in the DailyFX Trading Guides page.

The Dollar rally and Euro tumble that opened the week on the back of their respective monetary policy views has cooled. Filling the gap was a familiar fundamental theme: risk trends. While the core fundamentals may be weak for a durable and momentous build in 'risk' exposure, the correlation across otherwise disparate assets classes cannot be ignored. With a mind to longevity/conviction, we look at the sentiment oriented outlets that are better suited to short-term conditions. For the big picture, the deep pockets are unlikely to follow the tactitions into the pool; so big-picture views should be held separate. With the Dollar, Euro, Yen, equities and commodities offering a tempting mix of volatility and trend; we take the markets temperature in today's Trading Video.

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