FICC

The euro stopped weakening in March 2015, which coincided with the ECB starting its asset purchases. Since then, the ECB's incremental policies have been unable to push the euro lower. The price action speaks to the resilience of the currency and indicates that a lot of bad news has been discounted.

The wide WTI - Brent differentials at the front of these respective curves will continue to incentivize crude-oil exports from the U.S. to European refiners, who tend to favor the light-sweet crude coming out of LTO plays.

Fed policymakers will soon shift their focus toward the strong employment and inflation data and stress that further rate hikes this year are likely. This will stem the rally in risk assets and cap the upside in long-dated yields.

We still recommend a cautious stance on portfolio risk, for both credit and duration exposure, given that monetary policy expectations priced into Developed Market yield curves are already extremely dovish.

Over the coming two weeks, the G3 central banks will be holding key policy meetings that could prove instrumental in setting major FX trends for the next several months. What can currency traders expect?

A stunning 9.9 million-barrel build in U.S. oil inventories this week failed to arrest the upward climb in prices.

The Treasury market is now discounting too slow a pace of Fed tightening, while junk spreads are discounting too rapid an increase in the default rate. This week we examine the risk/reward proposition of temporarily leaning against some prevailing long-run macro trends.

Inflation expectations in the Developed Markets have been adjusting down to the lower trend of actual inflation, although the bulk of this adjustment now appears complete.

Special Report

We are introducing a new set of fair value models for currencies. On a cyclical basis, the dollar is expensive. However, this is not enough of a reason to expect an imminent fall in the greenback. The yen is extremely cheap, and its fair value is rising on the back of a positive terms-of-trade shock. The yuan is fairly valued. Most commodity currencies are not yet cheap.

Sterling has come under intense pressure since PM Cameron announced date of the EU referendum. Our bearish view on the British pound has not been based on a forecast of U.K. succession from the EU.