Global Liquidity Watch: Weekly Update

Global Liquidity Is Ticking Higher

Global liquidity levels are ticking higher. The loss of momentum in the US dollar is helping. Added to this, collateral values are improving, and bond market volatility – a key driver of the collateral multiplier – has stabilized too. We expect liquidity to continue to expand before peaking around Q4 this year. Near-term, Central Bank liquidity remains a cause for concern. Fed liquidity growth is subpar and the PBoC seems to be removing some of the liquidity it pumped into markets ahead of the Lunar New Year Holiday. Risk asset markets, gold and cryptocurrencies are sensitive to monetary inflation, i.e., liquidity. Gold is gaining, but risk assets are choppy and crypto has lost momentum. Put together, they suggest that more liquidity is needed.