What might happen in 2011 Q2?

From a fundamental point of view –

·         The much awaited US Non Farm Payroll data (Friday, 2030 Singapore time) exceeded expectation!

·         Unemployment rate was much better at 8.8% - improved US Economic data,

·         Coupled with China Manufacturing data growth

From the above (two biggest global economies), global speculators tend to take on more risks!

As a result,

Currencies - Commodity currencies (USD, NZD, CAD) strengthen, carry trade currencies (JPY, CHF) weaken.

Gold (safe haven) plunged. Global speculators leave safe haven and take on riskier assets while

Crude oil strengthen as a result of economic growth leading to higher demand, coupled with uncertainties from Libya and MENA.

What does this mean?

Carry trade is getting attractive!

Equity markets will strengthen as global speculators will take on more risk from improving economic data, encouraging corporate earnings release, future M&A.

Situations in MENA and Rising oil prices will continue to prompt some caution but currently not enough to outweigh the bullish sentiment.

My speculation

I am speculating

Equities - South East Asia, Korea, India, Thailand, Singapore and China to perform better than their peers.

Commodity currencies to continue strengthening against the USD, particularly the CAD.

JPY and CHF to weaken against the USD with carry trades activities and the strengthening of US data

Mining commodities – Gold to weaken as carry trade activities increases, with caution on flight to safe haven from MENA and Japan’s nuclear crisis. Crude Oil is heading further North with improved global data, M&A – factors for global growth.

What’s important this week in currencies?

Europe’s monetary policy announcement on Thursday and chatters from Fed officials on QE2 and inflation concerns and potential rate increases.