Looking around global asset markets, it seems that trust in the global recovery is increasing. Commodity prices are starting to advance strongly and Brent is trading close to $64/bl. Equities are also doing well, with some Asian stock indices now up more than 10% year-to-date and outperforming the Nasdaq. And the steepening of the yield curve continues as investors return the inflation premium to the long end of the market, while the short end remains anchored. The opinion that the 2020 contraction was not as deep as feared was also backed by 4Q GDP from many parts of Asia overnight. Then the story seems to be moving on to the question of how nice things have to get before central banks eliminate the cheap liquidity punchbowl? On Wednesday, when the US publishes January retail sales, this issue will be in focus and we will also get to see the FOMC minutes for January. Until the event risk on Wednesday, the dollar will remain supported against the low-yielders of JPY and EUR, but our core position is that the Fed is prepared to let the economy run hot-the that's the whole point of Average Inflation Targeting-and that the dollar should remain widely offered. Indeed, as vaccine rollouts accelerate across the globe, we're looking for another large leg of the dollar decline in 2Q.
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