The first months of 2015 were really busy. The markets have a main driver: the currency war. The main central banks are playing with the monetary policy, which has become very expansive everywhere. The list grows every month: more than 20 countries have reduced their rates. Cash flows everywhere, because monetary authorities and governments are really concerned about disinflation (not deflation…still). The main effects are the consequences in the exchange rates and the positive wave in the stock exchanges.
In the middle of this trend, US seems to be the odd, because the Federal Reserve has begun the way back from the quantitative easing applied in the last years. The outlook is that the institution will raise the interest rates sooner o later, as some messages have been already sent to the markets, but its members do not agree about the proper date. US economy has slowed its path in the last months, although it is typical in the last years linked to hard winters that stop the economic activity. However, the intention has already effects in the dollar, which has strengthened its position against all currencies. On the other hand, this possibility has no apparent effect in the stock exchanges, as the Nasdaq has topped historic positions.
Europe is living what many experts and governments (mainly from Southern Europe) demanded before: a quantitative expansion, as it was made in the US. The European Central Bank began the asset purchases in January. Euro has dropped to forgotten levels (around 1.07 dollars). Meanwhile, the decision opens a rally in the European stock exchanges, which have very welcomed this cash flow: just in the first quarter, Madrid increased 11.3%; Frankfurt, 22.5%; Paris, 20.7%; Milan, 21%. The new Greek government and the chance that Greece can be out of the euro (known as Grexit) is probably discounted by markets.
Latin-American countries are, on the contrary, suffering from a strong dollar, as most of them depend on exports. The drop also in the oil price (around 50% in six months) has very negative effects for Brazil, Venezuela and Mexico, which are very dependent from it. Other negative effects are inflation, as the exchange rates against dollar have become very volatile.
Finally, Asia is looking its three poles with different eyes: India is becoming stronger, as markets are really betting for Mr. Modi’s government. China, on the other hand, is creating new worries about the strength of its development, as several indicators open some doubts. In the case of Japan, the country is still in its endless crisis since the end of the 20th century and the outlook is not much better despite the recent new election.