I’ll make this quick – it’s my birthday. Something that previous crises have had in common with the current pandemic-driven meltdown (and I am in no way minimising what is easily the most serious threat to the global financial system in some time), is that at the end of it people look back and see a host of missed opportunities.

The last decade has seen the machines finally establish a position of dominance in markets, something they had been building to for at least a decade before that, and there is little doubt that automation has helped the FX market cope in the current crisis, but if ever there is a time for a human-generated, medium-term view, it is now. The funding challenge that is driving the dollar higher has seen the FX market establish some seriously long term lows for some currencies – most notably sterling, the Norwegian krona and the Australian dollar (others are, no doubt, available).

It is easy for me to sit here and make a prediction with no real skin in the game, I fully accept that, but frankly I am a little over writing about yet more market mayhem in other asset classes while FX markets generally are working well! The fact is though that we are facing a global crisis that could change the shape of the world and while I understand the rush to quality, is it time to ask whether the dollar, with the current administration’s apparent struggle to cope with the crisis, is still quality?

To have a medium term view you need deep pockets occasionally for the drawdowns, and a clear head that isn’t turned by the latest news item or piece of analysis from “some bloke on the Internet”. Thinking clearly is not easy in the current circumstances where the world’s governments seem intent on driving us back to the Stone Age, but consider this. China seems ahead of the curve in dealing with Covid-19 – maybe it should be as the crisis seemed to start from there (as I observed the other day, you can tell the world is changing because China sneezed and the world caught a cold) – but if that is the case it is likely to come back quicker economically speaking.

If that happens then in turn commodities will probably be in demand again as it tries to manufacture its way out of decline. So I wonder if, in three months’ time, we will be sitting here looking at, for example, an Australian dollar at 70 cents and wondering, “How did I miss that?”

Have a good week.

Colin_lambert@profit-loss.com

Twitter @lamboPnL

Colin Lambert

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