CONVERA
fall . With incoming economic data showing resilience , these stagflation risks have subsequently eased .
But where does this economic resilience come from ? The pandemic may have had a part to play . Fiscal stimulus measures sparked a global consumption boom that is still influencing the global economy in 2023 .
Consumers have accrued excess savings post-pandemic and a shift in consumer preferences may have contributed to the disconnect between lagging and leading economic indicators currently seen .
But this is not the only disparity contributing to an uncertain economy . The potential for further divergence between bond and equity markets could further alter the outlook for FX rates .
Quantitative tightening is gaining more and more attention and could have significant side effects for the economy and , subsequently , FX rates . Bond yields have continued to surge as central banks raise interest rates across the board and actively sell government bonds . The graph below shows how , historically , bond prices fall
Equities and bonds to surge – dollar to weaken in 2024 ?
Median cross-asset performance after interest rates peak , 7-day moving average
Note : Historical data since 1971 . G7 bond price series is an average of individual bond prices for G7 nations , weighed by their respective GDP values . G7 equity index is an average of individual equity indices , weighed by their respective trading volumes . Sources : Refinitiv , Yahoo Finance , Oxford Economics , Macrobond , Convera – August 2023
44 October 2023