The European Central Bank will assess the effects of the euro’s recent rally on consumer-price growth in its quarterly forecasts due in March, but recent moves have been rather limited, Executive Board member Piero Cipollone told Cyprus News Agency. Officials consider the exchange rate as one element “to project inflation dynamics,” the Italian policymaker said, according to a transcript posted on the ECB’s website on Sunday. “We will see how the new projections match and the impact this will have.” Mos ...

Equity Market Analysis - US equity markets show positive momentum, contrasting with a different outlook for European investors [1] - The equity market rally appears frothy, with the S&P 500 earnings yield at approximately 425 basis points and the ten-year yield around 428 basis points, resulting in a mildly negative equity risk premium [2] - The current market situation is reminiscent of the period before the dotcom bubble burst in 1999-2000, raising concerns about a potential correction [3] - The market seems to disregard factors like inflation, tariffs, and economic slowdown, focusing solely on rising equity valuations [4] - US stocks are exhibiting exceptionalism, appearing insulated from broader market events [5] - A market correction is anticipated sooner rather than later [6] Currency Market Analysis - The US dollar is trading at a deep discount, with potential for further decline [7] - The Euro is viewed favorably due to its potential to capitalize on US dollar weakness [7] - The ECB is expected to conclude its rate hikes before other major central banks [8] - The Eurozone's current account surplus provides buoyancy to the Euro [9] Gold Market Analysis - Gold is potentially overvalued at $3,300 per ounce [10] - Valuing gold as a deep discount bond suggests a value of around $3,070 per ounce, indicating a risk of correction [11]

Market Expectations & Trade Relations - Market expectations regarding US-China trade talks are realistic, with no anticipation of a grand deal [1][2] - A minor agreement on rare earth exports in exchange for tech exports may disappoint the market [2] - US effective tariff rate on all trade partners reached over 7% in April, a multiple of the rate in the past 25 years [3] - Tariff rate on China was up in the high 30% in April, subsequently decreasing but remaining at extreme levels [3] - Without a positive surprise in trade talks, the market may drift lower as profit-taking begins [4] Equity Market Performance - No fresh record highs are expected for US or global stocks [5] - US stocks have underperformed global stocks by approximately 7 trillion over the past four months [5] - US stocks experienced a sharp decline from early February to mid-March, subsequently keeping pace with global stocks [6] - A new positive catalyst is needed for US stocks to reach fresh record highs [7] Currency Market Outlook - The possibility of Euro/Dollar reaching 140 is being discussed [7] - The US dollar is expected to structurally decline significantly in the coming years, though not in a straight line [9] - An overshoot to 140 on Euro/Dollar is feasible but not expected this year [9]