Running around in circles

Returning from a public holiday yesterday and looking at the fallout across financial markets over the past two sessions, I am reminded of Monday’s words, which turned out to be oddly prescient. Given the lack of data releases this week, it might be a good one for investors to watch from the sidelines.

Asian markets rebound 

So it came to pass, with Monday’s Covid-19, we’re all doomed, meltdown being quickly replaced by a buy the dip frenzy yesterday. The FOMO gnomes of the stock markets led the way, of course, with Wall Street retracing much of its losses on Monday, helped along by a US bond market where yields have well and truly thrown in the inflationary towel.


To be sure, the retracement overnight and this morning in Asia have not been a perfectly binary outcome. Oil and industrial metals have only bounced modestly. Some Asian equity markets remain lower by some margin versus their opening levels on Monday. Perhaps the biggest lesson of the past two days is that the global recovery trade will not be a perfectly synchronised one. There will be haves and have nots, with the North American and European region powerhouses having, and most of Asia and all the developing world have-not-ing.


The delta variant will undoubtedly force the hand of the most optimistic forecasters in the Asia-Pacific now. With much of the region in lockdowns or semi-lockdowns or just a mess, the recovery will inevitably be slower here until the world gets its vaccination act together. I even wonder how China will reopen to the world, given that the delta-variant mashed its way through Mrs Halley’s and my vaccination with such ease, as it has across vaccinated persons in Indonesia.


That will be a story for another day, I am sure, possibly 2022. In the meantime, I am no longer expecting ASEAN to be the value-trade of 2021, and I believe its currencies will also underperform into H2. The region as a whole will also be vulnerable to the Fed blinking on inflation, although those fears are now overblown if the US bond market is to be believed.


In the bigger picture, monetary policy rules and I believe the virus tantrum of Monday will be the low point for the week. US bond yields continue to plummet; monetary policy globally remains ultra-loose, etcetera. In that environment, asset price inflation is inevitable as oceans of capital look for a home in a zero per cent world. Buy-the-dip is not a beaten concept. Given the lightness of the global data calendar this week, with only the ECB tomorrow to make things exciting, we probably haven’t seen the end of the headless tail chasing. As I said earlier, sensible investors should probably heat some popcorn, reach for the remote, and watch the circus from the sidelines.


In other news, the US infrastructure package’s passage through the US Senate is looking shakier by the day, with the procedural voting kicking off tomorrow. Like US Q2 earnings, though, it has been relegated to the bench as the delta variant steals screen time. There is perhaps a sense of inevitability, though, that the Senate Republicans and Democrats would ever agree on anything.


In Asia, South Korea recorded firm 20-day exports for July, while imports also rose above expectations. Higher imports also swung Japan’s trade surplus to a deficit in June, driven, no doubt, by higher energy and commodity prices. The Bank of Japan minutes highlighted that the Board wouldn’t hesitate to ease more if needed, still impressively consistent after 20+ years. The Tokyo Olympics have kicked off, with the biggest surprise being an athlete failing a drugs test instead of a Covid test. All-in-all, there was nothing in the data to shift market sentiment regionally.


Australian Retail Sales plummeted by 1.80% for June, led by the Victoria lockdowns. Inevitably, the New South Wales virus restrictions, which have now spread to Victoria and South Australia, will impact the data for July. Various institutions are now also downgrading Australian growth for the rest of 2021, and rightly so. It will stay the hand of the RBA, and I expect the Australian dollar to remain under pressure this week, especially if global risk sentiment also shifts south once again.


Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at Visit to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific, from 2016 to August 2022
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley was OANDA’s Senior Market Analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV and Channel News Asia as well as in leading print publications such as The New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

Latest posts by Jeffrey Halley (see all)