Market Thinking - Short term dollar rallies, longer term petrodollar threatened

Despite the Bank of England looking likely to raise rates for the rst time in over a decade, the rally in sterling looks to be fading. Indeed, the dollar looks to be strengthening across the board.

This may prompt prot taking in EM, but we would be selective, selling only those companies where the fundamentals of a stronger dollar are material. There are plenty of examples of strong cash ow in the region and while not as cheap as in January, most international investors remain underweight.

Bond markets are nervous about the Treasury yield, once again looking to break out through 2.4% as oil heads above $60 and traders rotate into cyclicals, while further out, the potential emergence of a petro-yuan threatens widespread disruption.