Citi Wealth Insights

G10FX: In what is now becoming an all too familiar pattern, risk assets and USD once again see-saw intraday during the US session overnight with the S&P500 turning positive for the year to reach a high of 3235 (accompanied by a weaker USD) only to end down nearly 1% (and USD up) by session end.

Focus may likely shift to US Q2 earnings season which unofficially begins with many of the big banks reporting on Tuesday, July 14.

As major parts of the US economy reopened, a re-acceleration of COVID-19 cases began with some states recording daily highs. However, Citi analysts think it is unlikely to see a repeat of indiscriminate shutdowns across the world economy as a response to the threat.

USD: Friday’s session typifies the tactical nature of risk sentiment more recently with a decidedly negative tone earlier in the Asian and European sessions turning positive into the NY session.

Tensions between US and China are likely to present real risks to the world economy, with recovery largely dependent on the economic rebound of the world’s two largest economies. Geopolitical / political disruptions are key risks and diversification remains paramount in managing potential volatilities.

Gold continues to lead commodities in year-to-date performance, proving to be an outperformer and acting as risk hedge in portfolios. Citi analysts continue to see gold prices trending up in the medium-term. Following a volatile 2Q, crude oil prices may be supported by demand improvements and lower supply.