3rd May 2022
The Cambridge Weekly – 3 May 2022
Range bound markets – despite the drama
Equity markets have been range-bound through the past few weeks, but it does not feel like it. Volatility is at its highest since the nasty period in March 2020, which always raises our perceptions of potential downside. But the volatility is not too surprising given the overall mix of news and economic data updates.
Currency markets: Theory versus practice
After climbing steadily higher for the better part of a year, the US dollar took a big jump last week. On Thursday, the world’s reserve currency surged to its highest level in 20 years against a host of other major currencies. The dollar index – which measures the dollar’s value against a basket of developed world currencies including the euro, yen and pound sterling – rose 1% on Thursday alone, taking it to just under 104. The dollar has now added 8% to its value this year, which presents a serious headwind for the global economic outlook and emerging markets in particular – which tend to have large dollar-denominated debts and pay for their imports and production inputs mostly in dollars.
Soaring house prices keeping inflation pressures up
Post-COVID inflation has hit just about every area of our lives over the last year, and residential property is no exception. During 2020, we saw several news stories about landlords being under pressure to cut rents as city dwellers flocked to more rural areas to buy houses. That story reversed as house prices rose sharply. Now, despite some cities being less busy overall than 2019, returning tenant demand has meant surging rents. Meanwhile, house prices have been incredibly strong this year, with no sign of slowing down.