Canada

Australia's equities and currency are driven largely by industrial commodities prices, Canada's by the oil price. Given our more positive view on oil, we prefer Canadian assets, though both markets face risk from stretched property prices and household debt.

The Fed is accentuating bearish dynamics for the dollar over the next three to six months. The upcoming National Congress of the Communist Party of China provides Chinese authorities with an incentive to ramp up stimulus this year. The new Treasury semi-annual report pre-empts meaningful direct interventions to soften the yen. More than just Brexit risk is weighing on the pound.

The dollar countertrend move has more downside, but beyond the next few months, the dollar remains in a cyclical bull market. Improvements in global growth, even if temporary, are likely to lift non-U.S. rates more than U.S. ones. The euro will benefit from that move as investors still have deep negative feelings toward EUR/USD, exactly as economic momentum has moved in favor of Europe. The SEK should outperform.

Japan is in a liquidity trap: bad economic news is good for the yen while good economic news is bad for the yen. Chinese reflation could help risk assets in the months ahead, but poor EM fundamentals will reassert themselves later this year. The yen bull market is not over yet. The BoC was more positive on growth than anticipated. The BoE's Super Thursday was a non-event.

Fed dovishness is weakening the U.S. dollar. As the ECB and BoJ move to the sidelines and the Fed remains reluctant to hike rates, the euro and Japanese yen should continue to recover versus the greenback.

Risk assets are stuck in a range driven by the Fed feedback loop. But the current rally may continue for another quarter or two.

In this <i>Special Report</i>, we present a detailed discussion on the outlook for Australian credit markets. Our conclusion is that investors should begin increasing exposure to Australian spread product.

The British pound may be prone to further weakness in the coming months as the odds of a Brexit rise.

A surprisingly dovish outcome from this week's FOMC meeting has led to broad-based weakness in the U.S. dollar. The monetary policy divergence supporting the dollar may have peaked.

This <i>Special Report</i> reviews all of our active recommendations, including our over/underweight country and asset allocation positions, as well as our current tactical trades.