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Citi Wealth Insights

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US exceptionalism driving USD strength; Gold outperforms on the ultra-low rates outlook while JPY behaves like an Asia EM currency

USD: News in South Korea of 31 new coronavirus cases in one day, in what the media terms another “super-spreader” event, as well as a South Korean technology company quarantining 800 workers, causes weakness across the Asia FX complex versus USD with CNH, KRW, SGD, MYR and THB hit hardest, while IDR sees BI intervention and a rate cut to push it lower.
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US exceptionalism driving USD strength; Gold breaks its correlation with USD while JPY weakens even as risk sentiment is weak

USD: Key data/ event highlights from overnight -
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US exceptionalism driving broad based USD strength; Singapore’s expansionary budget still leaves Citi’s base case for MAS easing

USD & Safe Havens (Gold): The broad based USD Index (DXY) approaches a 99.50 high and Gold trades above 1600 as pessimism comes back across markets following a major US tech company’s announcement that it would cut revenue guidance due to the Coronavirus.
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China announces a raft of stimulus measures to support sentiment; USD at 4 month highs as China enters a critical phase to tackle Coronavirus

Safe Havens (JPY, Gold & CHF): A slowdown in the growth rate of new coronavirus cases, coupled with policy support from China (please refer to the paragraph below for a list of Chinese stimulus measures so far) continues to support risk sentiment for now (though Gold remains particularly resilient to this current supportive risk backdrop).
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What are Markets Pricing In?

COVID-19 appears as the first new shock to positive expectations for the world economy in 2020. Global financial market volatility is expected to increase in the immediate future and strategies acknowledging this are preferred.
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Addressing Concerns on the COVID-19

Will China’s economy be able to recover quickly like in 2003? Back in 2003, China’s economic growth fell from 12% QoQ annualized in 1Q to 3.5% in 2Q during the depth of the SARS crisis, but snapped back to 16% in 3Q.
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