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How global markets are reacting to dollar gain
The dollar fell today, losing some of the gains it made from Friday's U.S. jobs data, reflecting a pullback by global markets on initial reaction. Victor Aluyi, the Head of Investment at Sankore Global Investments, joins CNBC Africa for more.
Mon, 08 Aug 2022 14:18:19 GMT
Disclaimer: The following content is generated automatically by a GPT AI and may not be accurate. To verify the details, please watch the video
AI Generated Summary
- The US dollar's surge, driven by aggressive monetary policy in the United States, has created challenges for emerging market economies like Nigeria, leading to weakened local currencies and difficulties in accessing international capital markets.
- The anticipated drop in US inflation, influenced by decreasing energy prices, is a key factor in monitoring inflation dynamics globally, with a focus on preventing persistent inflationary pressures.
- The upcoming treasury auction is poised to influence sentiment in capital markets, particularly impacting fixed income markets and equities, based on movements in treasury prices and potential shifts towards less risky assets by investors.
The global markets are closely monitoring the recent gains of the US dollar and how it will impact emerging economies, including countries like Nigeria. In a recent interview with Victor Aluyi, the Head of Investment at Sankore Global Investments, on CNBC Africa, the discussion centered around the implications of the strengthening US dollar on global markets and the potential effects on inflation. Victor Aluyi highlighted the significant monetary policy changes in the United States, with interest rates rising rapidly over a short period, leading to a 15% increase in the dollar against a basket of partner currencies year on year. This surge in the dollar value has created challenges for emerging market economies like Nigeria, causing their local currencies to weaken and making it more difficult to access international capital markets. The tightening monetary policy in the US has also resulted in higher US benchmark yields, impacting emerging market securities. As the US dollar continues to strengthen, the trend is expected to persist, affecting emerging markets further. The interview delved into the upcoming US inflation data release, with expectations that the Consumer Price Index (CPI) will show a decrease due to a drop in energy prices. Victor Aluyi expressed that while markets anticipate a decline in inflation, it is crucial to prevent inflation from becoming persistent. The conversation shifted to the impact of global events, such as the shipment of grains from Ukraine, on global inflation. The movement of grain supplies is expected to alleviate food price pressures and contribute to a reduction in global inflation rates. However, for countries like Nigeria and Ghana, inflation remains a concern due to external factors like exchange rate volatility and import-related inflation. The interview underscored the policy responses of these nations to address inflation, with a focus on using monetary tools to combat rising prices. Victor Aluyi emphasized the importance of monitoring the policy effectiveness and its impact on inflation levels. Looking ahead, the interview highlighted the upcoming treasury auction as a significant event that could influence sentiment in the capital markets. The outcome of the auction, particularly the movement in one-year treasury prices, will set the tone for fixed income markets and impact equities. Investors are keeping a close eye on market developments, with potential shifts towards less risky assets if treasury rates increase. Overall, the global markets are navigating through uncertainties linked to the US dollar's gains, inflation dynamics, and policy responses as they brace for potential market reactions and implications for emerging economies.
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