Currency Markets to See Reflation Trade Drive Moves in March

Currency Markets to See Reflation Trade Drive Moves in March
Currency Markets to See Reflation Trade Drive Moves in March

Strategists polled by Reuters recently expect the reflation trade concern to drive moves in currency markets through the current month as well. The high volatility in government bond yields had scared global markets, causing a sell-off in global equity markets and scaring investors from trading riskier currencies as well during February.

Markets have been concerned about the numerous stimulus efforts and monetary easing by governments and central banks sending inflation higher even as they help boost economic recovery in the wake of the coronavirus crisis. A significant majority of strategists polled forecast the reflation trade – the upbeat mood in anticipation of economic recovery, to drive moves in global currency markets during this month as well.

In addition, the poll also indicates an extended weakness for the US dollar against other currencies through the year. Previous editions of the poll had also expected the greenback to trade bearish against its peers as the global economy recovers, weakening its safe haven appeal and driving up the demand for riskier instruments and currencies instead.

Other polls by Reuters expect the global equity markets to continue to rally through 2021 amid rising hopes for the COVID-19 vaccine rollouts to bring an end to lockdowns and restrictions. Meanwhile, strategists forecast the maximum amount of bullishness in commodity currencies, owing to a rise in commodity prices as the market sentiment improves, followed by developed and emerging market currencies.

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