But it is currencies that have piqued most interest. Markets at the start of 2017 were positioned for a stronger dollar and stable euro, yet year to date the greenback is down against both sterling and the euro, as the latter has gone from strength to strength.
Inflation and economic recovery in the eurozone, in the periphery as well as in Germany, has seen increased calls for tightening of monetary policy. However, European Central Bank chairman Mario Draghi has said euro strength is hampering the bank’s plans. This strength has also raised concerns for its equity market. While continued loose policy is a tailwind for stocks, euro strength is hampering exporters and expectations for earnings downgrades are increasing.
In the UK, sterling is down against the euro but up against the dollar, meaning a mixed period for large caps. Brexit-induced concerns over the domestic economy have not yet been borne out, aiding the FTSE All-Share index. The FTSE 250 has outperformed year to date, gaining 11 per cent versus 7 per cent for its large-cap peer.
Taha Lokhandwala is deputy editor of Investment Adviser
