Talking Points:

- Today marks the end of Q1, 2018 and with many markets already closed in observance of Passover/Good Friday, the page has turned into Q2. The first quarter of this year was marked by a rise in equity volatility to go along with a fast jump in US Treasury Yields. FX markets were not left untouched, as a series of interesting themes has developed. We look into three of the more prominent below.

- The US Dollar remains extremely weak despite the fact that the Fed is one of the only games in town for rate hikes. This is likely emanating from concerns around fiscal policy, but it’s come along with moves of strengths in various stages of development in both the Euro[1] and the Japanese Yen[2].

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Open of Q2 Highlights a Number of Interesting Forex Themes

As we turn the page into the second quarter of 2018, a number of interesting themes remain across global financial markets. The first quarter of this year turned out to be quite eventful. We got the rate hike out of the Federal Reserve in March[6] and the Fed is now forecasting an additional two moves in the year. We saw the Bank of England prep markets for a possible rate hike in May, and even the European Central Bank started to shift their language for what could lead to an eventual tightening of policy[7]. This is the move that many have been waiting for (or fearing?) since the QE-heavy environment took over after the Financial Collapse, and this is when we see global Central Banks shift away from Quantitative Easing and uber-dovish monetary policy towards a more balanced stance and, in some cases, even Quantitative Tightening.

Below, we’re looking at three of the more interesting FX-related themes as we walk into Q2 of 2018, focusing-in on three of the world’s largest open economies and what may come about as we move deeper into the year. We discussed this topic in yesterday’s webinar, and if you’d prefer video or would just like a video accompaniment, that archive is available from the following link: Q2 Preview: USD Weakness, Yen Strength, Equity Vol in the Spotlight[8].

The US Dollar’s Persistent Weakness Continues

All in all, it wasn’t that bad of a quarter for the US Dollar. As we opened into the New Year this certainly didn’t seem as though it would be the case, as sellers continued to push the

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