The document provides a three month market outlook and analysis of the EUR/USD exchange rate. It conducts both fundamental and technical analysis to determine whether an importer should complete a $5 million order using the current forward rate of $1.133 or the future spot rate. The fundamental analysis examines factors like political stability, inflation rates, purchasing power parity, and interest rates in Europe and the US. The technical analysis looks at price movements over 6 months, 1 year, 3 years and 5 years. Based on the analyses, the report recommends using the current forward rate due to uncertainties in the global economy and an expected weakening of the euro against the dollar in the next three months.
While equity and commodity markets have recovered, it is an almost consensus view that already tepid global economic growth in H2 2015 likely weakened furthered in Q3 and shows few signs of recovering near-term,
Governments, lacking in both leadership and fiscal-reflation headroom, have passed the buck to central banks struggling to hit multiple growth, inflation and financial stability targets.
However, talk of global recession let alone economic collapse is somewhat overdone and I reiterate my long-held view that the global growth story is a cause for concern, not panic (17 December 2014).
In the past week European and global politics, strong US growth data, mixed global macro numbers and eurozone, Chinese and Indian central bank policy have eclipsed Trump-mania.
What is perhaps more remarkable is markets’ reasonably benign, “risk-on” reaction, bar the euro’s sell-off in the wake of today’s ECB policy meeting.
One interpretation is that markets have become complacent to the risks presented by President Trump’s constellation of pseudo-policies, surging nationalism in Europe, the UK’s uncertain economic future and continued capital outflows from China.
I have a somewhat different take, namely that markets are rightly discounting some of the more extreme and perverse scenarios, including:
Protectionist US policies coupled with higher US yields and a strong dollar collapsing tepid emerging market, and eventually global, economic growth;
The “no” vote in the Italian referendum leading to the economic collapse of the European Union’s third largest economy;
Surging European nationalism culminating in the collapse of the eurozone and/or European Union;
The British government opting to sacrifice growth in exchange for a hard version of Brexit and;
Capital outflows from China ultimately forcing policy-makers into accepting a Renminbi collapse and shocking a corporate sector with significant dollar-debt.
Is it time to buy the U.S. in early June?
An oil and materials price bottom is fully in. That is bullish risk. The S&P500 can finish 2016 above 2200, which is a +5%
return. Another big positive: A U.S. 5.0% unemployment rate adds consumer momentum via pending wage pressure. This
builds incomes.
U.S. shares have recovered. Watch for bullish S&P500 breaks of 2,100 in June or later.
Before the Aug. 2015 sell-off, the S&P500 traded at 16.6x forward earnings vs. a 10-year average of 14.1x. The Feb index
traded at 15.2. The June 2016 index trades at 16.7x forward earnings. Bearishly, we trade a bit above valuation levels of
August 2015.
Zacks strategists still call an S&P500 at 2,200 to 2,300 by yearend, given a 15% chance of U.S. recession (including me).
Frequent u-turns in the Fed’s policy stance, central banks’ lack of monetary policy credibility, currency wars and gyrations in macro data are being blamed for financial market volatility and record lows in government bond yields. The forthcoming EU referendum has also buffeted UK financial markets.
But on the whole, financial markets and macro data have since 1 April showed a far greater degree of stability than in preceding quarters.
US interest rate, equity and currency markets have weathered the gyrations in the Fed’s policy stance and the ebbs and flows in US data. German and Japanese government bond yields have fallen but ultimately been less volatile than in Q1. The World Equity Index has also been constrained in a reasonably narrow range, thanks at least in part to signs that global GDP growth stabilised in Q1.
This relative stability has not been confined to the dollar. So far, Q2 2016 has been the least volatile quarter since January 2015 – as defined by the low-high range using daily data – for most major nominal effective exchange rates (NEERs). These include developed and EM currencies, as well as commodity and non-commodity currencies. Among G7 currencies, the euro NEER has been particularly stable in a 2.1% range.
The picture is also one of relative calm in emerging markets, with the pick-up in foreign capital inflows in April and June and in commodity prices since March helping to stabilise EM currencies without central banks having to draw on still significant FX reserves.
Commodity prices, including crude oil, have risen sharply so far in Q2 but their volatility has remained in line with historical standards, particularly in recent weeks. This has contributed to greater stability in commodity currencies, with the exception of the Australian dollar.
If anything, this lack of directionality has forced financial market players to be light-footed and adopt short-term tactical strategies. The question now is whether this relative calm is here to stay or whether it augurs more violent corrections as was the case earlier this year.
The UK referendum on EU accession has the potential to be far more destabilising to financial markets than the BoJ’s policy meeting on 16 June and in particular the Fed’s meeting the day before. While UK markets would likely feel the brunt of a decision to leave the EU, the euro would also likely weaken and global equity markets conceivably sell off.
The Fed’s policy meeting on 27th July could also prove disruptive at a time of potentially reduced summer-liquidity.
« Market Perspectives » est notre revue mensuelle des marchés. Elle présente de la façon la plus synthétique possible :
- notre analyse des principaux faits marquants et indicateurs macro susceptibles de dessiner les marchés sur le mois.
- notre vision sur les différentes classes d’actifs
Cette revue sera continument enrichie avec nos indicateurs quantitatifs.
La plupart de nos analyses sont disponibles sur www.finlightresearch.com
Our monthly publication “Market Perspectives” presents a synthetic view of all the asset classes we cover.
The report is composed of six sections covering Macro, Equities, FI & credit, FX, Commodities and Alternatives.
Each section is preceded by a summary of our views on the related asset class.
Most of our publications are available on our web site www.finlightresearch.com
While equity and commodity markets have recovered, it is an almost consensus view that already tepid global economic growth in H2 2015 likely weakened furthered in Q3 and shows few signs of recovering near-term,
Governments, lacking in both leadership and fiscal-reflation headroom, have passed the buck to central banks struggling to hit multiple growth, inflation and financial stability targets.
However, talk of global recession let alone economic collapse is somewhat overdone and I reiterate my long-held view that the global growth story is a cause for concern, not panic (17 December 2014).
In the past week European and global politics, strong US growth data, mixed global macro numbers and eurozone, Chinese and Indian central bank policy have eclipsed Trump-mania.
What is perhaps more remarkable is markets’ reasonably benign, “risk-on” reaction, bar the euro’s sell-off in the wake of today’s ECB policy meeting.
One interpretation is that markets have become complacent to the risks presented by President Trump’s constellation of pseudo-policies, surging nationalism in Europe, the UK’s uncertain economic future and continued capital outflows from China.
I have a somewhat different take, namely that markets are rightly discounting some of the more extreme and perverse scenarios, including:
Protectionist US policies coupled with higher US yields and a strong dollar collapsing tepid emerging market, and eventually global, economic growth;
The “no” vote in the Italian referendum leading to the economic collapse of the European Union’s third largest economy;
Surging European nationalism culminating in the collapse of the eurozone and/or European Union;
The British government opting to sacrifice growth in exchange for a hard version of Brexit and;
Capital outflows from China ultimately forcing policy-makers into accepting a Renminbi collapse and shocking a corporate sector with significant dollar-debt.
Is it time to buy the U.S. in early June?
An oil and materials price bottom is fully in. That is bullish risk. The S&P500 can finish 2016 above 2200, which is a +5%
return. Another big positive: A U.S. 5.0% unemployment rate adds consumer momentum via pending wage pressure. This
builds incomes.
U.S. shares have recovered. Watch for bullish S&P500 breaks of 2,100 in June or later.
Before the Aug. 2015 sell-off, the S&P500 traded at 16.6x forward earnings vs. a 10-year average of 14.1x. The Feb index
traded at 15.2. The June 2016 index trades at 16.7x forward earnings. Bearishly, we trade a bit above valuation levels of
August 2015.
Zacks strategists still call an S&P500 at 2,200 to 2,300 by yearend, given a 15% chance of U.S. recession (including me).
Frequent u-turns in the Fed’s policy stance, central banks’ lack of monetary policy credibility, currency wars and gyrations in macro data are being blamed for financial market volatility and record lows in government bond yields. The forthcoming EU referendum has also buffeted UK financial markets.
But on the whole, financial markets and macro data have since 1 April showed a far greater degree of stability than in preceding quarters.
US interest rate, equity and currency markets have weathered the gyrations in the Fed’s policy stance and the ebbs and flows in US data. German and Japanese government bond yields have fallen but ultimately been less volatile than in Q1. The World Equity Index has also been constrained in a reasonably narrow range, thanks at least in part to signs that global GDP growth stabilised in Q1.
This relative stability has not been confined to the dollar. So far, Q2 2016 has been the least volatile quarter since January 2015 – as defined by the low-high range using daily data – for most major nominal effective exchange rates (NEERs). These include developed and EM currencies, as well as commodity and non-commodity currencies. Among G7 currencies, the euro NEER has been particularly stable in a 2.1% range.
The picture is also one of relative calm in emerging markets, with the pick-up in foreign capital inflows in April and June and in commodity prices since March helping to stabilise EM currencies without central banks having to draw on still significant FX reserves.
Commodity prices, including crude oil, have risen sharply so far in Q2 but their volatility has remained in line with historical standards, particularly in recent weeks. This has contributed to greater stability in commodity currencies, with the exception of the Australian dollar.
If anything, this lack of directionality has forced financial market players to be light-footed and adopt short-term tactical strategies. The question now is whether this relative calm is here to stay or whether it augurs more violent corrections as was the case earlier this year.
The UK referendum on EU accession has the potential to be far more destabilising to financial markets than the BoJ’s policy meeting on 16 June and in particular the Fed’s meeting the day before. While UK markets would likely feel the brunt of a decision to leave the EU, the euro would also likely weaken and global equity markets conceivably sell off.
The Fed’s policy meeting on 27th July could also prove disruptive at a time of potentially reduced summer-liquidity.
« Market Perspectives » est notre revue mensuelle des marchés. Elle présente de la façon la plus synthétique possible :
- notre analyse des principaux faits marquants et indicateurs macro susceptibles de dessiner les marchés sur le mois.
- notre vision sur les différentes classes d’actifs
Cette revue sera continument enrichie avec nos indicateurs quantitatifs.
La plupart de nos analyses sont disponibles sur www.finlightresearch.com
Our monthly publication “Market Perspectives” presents a synthetic view of all the asset classes we cover.
The report is composed of six sections covering Macro, Equities, FI & credit, FX, Commodities and Alternatives.
Each section is preceded by a summary of our views on the related asset class.
Most of our publications are available on our web site www.finlightresearch.com
Bond markets remain in focus after recent curve inversionHantec Markets
Economic data for the US is key to how bond yields respond and how this impacts across major markets. The first week of the month is always jam packed with tier one data and this one could be key for the dollar. We look at the impact on forex, equities and commodities.
Sticking to forecasts: Fed summer hike, Dollar hat-trick still on the cards, ...Olivier Desbarres
The Federal Reserve’s minutes of its 27th April policy meeting released last week set the tone for a possible June or July rate hike. On balance, recent US and global data are unlikely to have fundamentally changed the Federal Reserve’s view that a summer hike may be appropriate.
This is line with my long-held forecast that the Federal Reserve would likely hike once or twice this year, with the first hike in June. I recently updated my forecast to a July hike as it gives the Fed more time to assess US and global data and the result of the UK referendum on 23rd June. The risk is that the very threat of a hike derails financial markets sufficiently for the Federal Reserve to postpone its second-hike-in-a-decade to later this year.
Surprisingly, this message was seemingly absent from the wafer-thin policy statement the Federal Reserve issued on 27th April.
I maintain my January forecast that the dollar’s nominal effective exchange rate (NEER)[1] may well end the year slightly higher, propelled by the resilience of the US economy and the Federal Reserve going against the global trend of easier (or at least easy) monetary policy.
Conversely, the recent modest weakening in emerging market currencies is likely to extend, as per my prediction in early April. Macro data are too weak to reassure markets that any economy can single-handedly steady slowing global growth but strong enough for the Federal Reserve to force markets to reprice the risk of tighter US policy.
My core scenario has been that the UK would vote to remain in the EU and, if anything, that conviction has strengthened following recent surveys. The lifting of this uncertainty would see a reasonably competitive sterling appreciate, albeit modestly given the UK’s underlying structural deficiencies.
Olivier DEsbarres: What to expect in 2016 – same, same, but worseOlivier Desbarres
It is clear that markets so far this year are trading on sentiment, more specifically fear, with hard-data playing second fiddle. Or more accurately, price action suggests that markets are focusing on disappointing December numbers (e.g. US ISM) or even reasonably uneventful data (Chinese manufacturing PMI) and ignoring strong data such as U.S non-farm payrolls, Chinese services PMI and exports (see Figure 1). The hit-and-miss approach of Chinese policy-makers to stabilise equity markets (and ultimately growth) have done little to restore confidence. I nevertheless flag in Figure 37 some of the key data and events to focus on this year.
The Federal Reserve is unlikely to hike its policy rate from 0.25-0.50% at its 16th March 2016 meeting and may have little choice but to revise down its expectations to around 3 hikes for 2016 in its accompanying projections. In the 16th December “dot-chart”, the median expectation among the 10 voting Federal Open Market Committee (FOMC) members and 7 non-voting members was for four hikes this year (the weighted average was for a slightly less hawkish 91bp of hikes).
US GDP data weakest of a disappointing lot
Data released today show that Q1 2017 real GDP growth:
In the US slowed to 0.7 quarter-on-quarter (qoq) annualised, from 2.1% qoq in Q4 2016 – the weakest growth rate in three years (see Figure 1);
In the UK halved to 0.3% qoq – the weakest growth rate in a year;
In France slowed to 0.3% qoq from 0.5% qoq in Q4 2016; and
In Spain rose to 0.8% qoq from 0.7% qoq in Q4 2016.
The ebb and flow of financial markets brings with it a shift in focus from one theme to another, often amplifying the different factors affecting the market. As discussed in our latest issues of Monthly Perspectives, risk has moved to the forefront for investors. Most recently, the unexpected outcome of the Brexit vote brought a wave of political uncertainty and with it, an increased focus on a broader theme: geopolitical risk.
This monthly briefing highlights that financing conditions improve in euro area peripheral countries and in emerging economies, that the US economy bounces back after a difficult first quarter and that China’s first-quarter GDP growth is the slowest in two years.
For more information:
http://www.un.org/en/development/desa/policy/wesp/wesp_mb.shtml
The magnificent 7 and equity markets review 11Markets Beyond
2011 was a bumby year for financial markets and 2012 will be no less hectic. However the US economic picture is improving and as written in early 2011 no double dip to be expected but for FED policy folly.
Global imbalances remain, but the eurozone is where lies the deepest problems which have not been properly addressed.
Remain invested in high yielding equities / net cash companies with a strong franchise and look at strong brands in fast growing economies; stay clear from the bond market and financials.
Trump continues to be a driver of market sentimentHantec Markets
Traders that have been getting worked up by the impact of "risk on, risk off" are now having to get used to this morphing into "Trump on, Trump off" (as dreadful as this sounds). You even have some expanding this with "Trumpflation" and "Donald down", but this will be the final time you hear these terrible terms on these pages. Anyway, Donald Trump continues to have a significant impact on market sentiment across financials with forex and commodities especially driving off moves on Treasury yields and the dollar. With a light economic calendar this is likely to continue this week.
The future path of US interest rate policy remains a major source of uncertainty for global markets, with the rates market far more dovish than analysts and in particular FOMC members. Someone will ultimately be proven wrong and this will impact asset prices, including the US dollar.
Baring calamitous February inflation and retail sales data, I expect the Fed to hike rates 25bp on 15th March for the second time in three months, in line with market pricing and my mid-February forecast.
While underlying US inflation has only edged up slowly and payroll growth remains modest, other US data have been reasonably buoyant. The pool of available labour continues to grind lower and regional indicators, national confidence surveys and housing data pushed higher in January-February.
Moreover, normally dovish FOMC members have not made a strong case for a March pause and, along with Chairperson Yellen, have seemingly for now at least not made the Fed hiking cycle conditional on Trump delivering on his promise to loosen fiscal policy.
The big question is what next for the Fed. Its updated forecasts and dot-chart and Yellen’s question-and-answer session will undoubtedly provide some extra colour.
But it may be a little premature for the 17 FOMC members to materially change their forecast for the appropriate pace of hikes for 2017, which stands at 74bps – broadly in line with current market pricing.
The risk to my turn-of-the-year forecast that the Fed may only deliver two hikes this year is probably to the upside. But if the Fed is going to hike once a quarter, it will want to prepare markets conditioned by years of hikes far more modest than predicated by the Fed.
In France, potential presidential candidates have only a week left to meet the Constitutional requirements to become an official candidate in the first round.
My core scenario remains that Fillon will remain in the presidential race, that the first and second rounds due on 23rd April and 7th May will not be pushed back, that Le Pen and Macron will likely make it to the second round run-off and that Le Pen will lose the second round whether she faces Macron or Fillon.
But one should at least entertain the possibility, even if remote, that Jean-Luc Mélenchon, currently fifth in the polls on 12%, will not meet the requirements to be a candidate in the first round – namely the written support of 500 elected sponsors – which could in turn boost support for Socialist candidate Benoit Hamon.
Moreover, it is still conceivable, albeit unlikely, that Fillon will make it to the second round or conversely pull out of the race with Alain Juppé filling his place. Finally, the possibility of this year’s elections being postponed, while extremely slim, merits discussion.
London, 22 November 2013 MNI RUSSIA BUSINESS SENTIMENT EMBARGOED UNTIL 9.45 A.M. MOSCOW TIME. MNI Russia Business Indicator Falls to 51.5 In November from 56.3 in October. Future Expectations Hit A New Low. The MNI Russia Business Indicator declined for the second consecutive month, while expectations for the future hit their lowest level since the series began in March.
Bond markets remain in focus after recent curve inversionHantec Markets
Economic data for the US is key to how bond yields respond and how this impacts across major markets. The first week of the month is always jam packed with tier one data and this one could be key for the dollar. We look at the impact on forex, equities and commodities.
Sticking to forecasts: Fed summer hike, Dollar hat-trick still on the cards, ...Olivier Desbarres
The Federal Reserve’s minutes of its 27th April policy meeting released last week set the tone for a possible June or July rate hike. On balance, recent US and global data are unlikely to have fundamentally changed the Federal Reserve’s view that a summer hike may be appropriate.
This is line with my long-held forecast that the Federal Reserve would likely hike once or twice this year, with the first hike in June. I recently updated my forecast to a July hike as it gives the Fed more time to assess US and global data and the result of the UK referendum on 23rd June. The risk is that the very threat of a hike derails financial markets sufficiently for the Federal Reserve to postpone its second-hike-in-a-decade to later this year.
Surprisingly, this message was seemingly absent from the wafer-thin policy statement the Federal Reserve issued on 27th April.
I maintain my January forecast that the dollar’s nominal effective exchange rate (NEER)[1] may well end the year slightly higher, propelled by the resilience of the US economy and the Federal Reserve going against the global trend of easier (or at least easy) monetary policy.
Conversely, the recent modest weakening in emerging market currencies is likely to extend, as per my prediction in early April. Macro data are too weak to reassure markets that any economy can single-handedly steady slowing global growth but strong enough for the Federal Reserve to force markets to reprice the risk of tighter US policy.
My core scenario has been that the UK would vote to remain in the EU and, if anything, that conviction has strengthened following recent surveys. The lifting of this uncertainty would see a reasonably competitive sterling appreciate, albeit modestly given the UK’s underlying structural deficiencies.
Olivier DEsbarres: What to expect in 2016 – same, same, but worseOlivier Desbarres
It is clear that markets so far this year are trading on sentiment, more specifically fear, with hard-data playing second fiddle. Or more accurately, price action suggests that markets are focusing on disappointing December numbers (e.g. US ISM) or even reasonably uneventful data (Chinese manufacturing PMI) and ignoring strong data such as U.S non-farm payrolls, Chinese services PMI and exports (see Figure 1). The hit-and-miss approach of Chinese policy-makers to stabilise equity markets (and ultimately growth) have done little to restore confidence. I nevertheless flag in Figure 37 some of the key data and events to focus on this year.
The Federal Reserve is unlikely to hike its policy rate from 0.25-0.50% at its 16th March 2016 meeting and may have little choice but to revise down its expectations to around 3 hikes for 2016 in its accompanying projections. In the 16th December “dot-chart”, the median expectation among the 10 voting Federal Open Market Committee (FOMC) members and 7 non-voting members was for four hikes this year (the weighted average was for a slightly less hawkish 91bp of hikes).
US GDP data weakest of a disappointing lot
Data released today show that Q1 2017 real GDP growth:
In the US slowed to 0.7 quarter-on-quarter (qoq) annualised, from 2.1% qoq in Q4 2016 – the weakest growth rate in three years (see Figure 1);
In the UK halved to 0.3% qoq – the weakest growth rate in a year;
In France slowed to 0.3% qoq from 0.5% qoq in Q4 2016; and
In Spain rose to 0.8% qoq from 0.7% qoq in Q4 2016.
The ebb and flow of financial markets brings with it a shift in focus from one theme to another, often amplifying the different factors affecting the market. As discussed in our latest issues of Monthly Perspectives, risk has moved to the forefront for investors. Most recently, the unexpected outcome of the Brexit vote brought a wave of political uncertainty and with it, an increased focus on a broader theme: geopolitical risk.
This monthly briefing highlights that financing conditions improve in euro area peripheral countries and in emerging economies, that the US economy bounces back after a difficult first quarter and that China’s first-quarter GDP growth is the slowest in two years.
For more information:
http://www.un.org/en/development/desa/policy/wesp/wesp_mb.shtml
The magnificent 7 and equity markets review 11Markets Beyond
2011 was a bumby year for financial markets and 2012 will be no less hectic. However the US economic picture is improving and as written in early 2011 no double dip to be expected but for FED policy folly.
Global imbalances remain, but the eurozone is where lies the deepest problems which have not been properly addressed.
Remain invested in high yielding equities / net cash companies with a strong franchise and look at strong brands in fast growing economies; stay clear from the bond market and financials.
Trump continues to be a driver of market sentimentHantec Markets
Traders that have been getting worked up by the impact of "risk on, risk off" are now having to get used to this morphing into "Trump on, Trump off" (as dreadful as this sounds). You even have some expanding this with "Trumpflation" and "Donald down", but this will be the final time you hear these terrible terms on these pages. Anyway, Donald Trump continues to have a significant impact on market sentiment across financials with forex and commodities especially driving off moves on Treasury yields and the dollar. With a light economic calendar this is likely to continue this week.
The future path of US interest rate policy remains a major source of uncertainty for global markets, with the rates market far more dovish than analysts and in particular FOMC members. Someone will ultimately be proven wrong and this will impact asset prices, including the US dollar.
Baring calamitous February inflation and retail sales data, I expect the Fed to hike rates 25bp on 15th March for the second time in three months, in line with market pricing and my mid-February forecast.
While underlying US inflation has only edged up slowly and payroll growth remains modest, other US data have been reasonably buoyant. The pool of available labour continues to grind lower and regional indicators, national confidence surveys and housing data pushed higher in January-February.
Moreover, normally dovish FOMC members have not made a strong case for a March pause and, along with Chairperson Yellen, have seemingly for now at least not made the Fed hiking cycle conditional on Trump delivering on his promise to loosen fiscal policy.
The big question is what next for the Fed. Its updated forecasts and dot-chart and Yellen’s question-and-answer session will undoubtedly provide some extra colour.
But it may be a little premature for the 17 FOMC members to materially change their forecast for the appropriate pace of hikes for 2017, which stands at 74bps – broadly in line with current market pricing.
The risk to my turn-of-the-year forecast that the Fed may only deliver two hikes this year is probably to the upside. But if the Fed is going to hike once a quarter, it will want to prepare markets conditioned by years of hikes far more modest than predicated by the Fed.
In France, potential presidential candidates have only a week left to meet the Constitutional requirements to become an official candidate in the first round.
My core scenario remains that Fillon will remain in the presidential race, that the first and second rounds due on 23rd April and 7th May will not be pushed back, that Le Pen and Macron will likely make it to the second round run-off and that Le Pen will lose the second round whether she faces Macron or Fillon.
But one should at least entertain the possibility, even if remote, that Jean-Luc Mélenchon, currently fifth in the polls on 12%, will not meet the requirements to be a candidate in the first round – namely the written support of 500 elected sponsors – which could in turn boost support for Socialist candidate Benoit Hamon.
Moreover, it is still conceivable, albeit unlikely, that Fillon will make it to the second round or conversely pull out of the race with Alain Juppé filling his place. Finally, the possibility of this year’s elections being postponed, while extremely slim, merits discussion.
London, 22 November 2013 MNI RUSSIA BUSINESS SENTIMENT EMBARGOED UNTIL 9.45 A.M. MOSCOW TIME. MNI Russia Business Indicator Falls to 51.5 In November from 56.3 in October. Future Expectations Hit A New Low. The MNI Russia Business Indicator declined for the second consecutive month, while expectations for the future hit their lowest level since the series began in March.
Will 5G live up to its name as the future of wireless communication? Know all the details here.
#infographics #5Gnetwork #theFuture #wirelesscommunication
https://houseofit.com.au/5g-the-future-of-wireless-technology/
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Read More: http://topanalyticalvirtualassistantforbusiness.com/moz-tutorial/
No UK rate hikes this year and room for further Euro upsideOlivier Desbarres
The odds of a 25bp Bank of England rate hike at next week’s policy meeting are all but dead in my view following tepid GPD growth of 0.3% qoq in Q2 2017.
Moreover, UK GDP growth and inflation dynamics, allied to forthcoming changes in the composition of the Monetary Policy Council, point to the record-low policy rate of 0.25% remaining on hold for the remainder of the year.
Forecasting European Central Bank (ECB) monetary policy, including the timing and modalities of changes to its Quantitative Easing program, is arguably a far trickier proposition.
While the ECB may be incentivised to slow the current rapid pace of Euro appreciation, at this stage I do not expect the ECB to try and to stop, let alone reverse, the Euro’s upward path.
Q1 has been a challenging one for the US dollar. Economist Jeremy Cook looks at the global economic and political factors that can impact the dollar, and makes predictions that will be important for global companies to consider.
The rise in bond yields in developed economies in the past 6 weeks remains one of the over-riding themes as we head into the last seven days of the US presidential campaigns.
Markets are now fretting about the implications for global growth and asset valuations and ultimately whether elevated global risk appetite will correct more forcefully.
Higher international commodity prices, a pick-up in global GDP growth in Q3 and early Q4 and easing deflation fears suggest that interest rate policies in developed economies may have reached an important inflexion point – in line with the view I expressed six weeks ago.
Developed central banks may refrain from loosening monetary policy further near-term, with the exception of the RBNZ and possibly ECB. At the very least, policy-makers will tweak a discourse which has largely focused on doing “whatever it takes”.
Recent US data have paved the paved the way for a 14th December Fed hike, conditional on Democrat candidate Hilary Clinton wining the 8th November US presidential elections.
But with the exception of the Fed and possibly a handful of EM central banks, rate hikes are a story for the latter part of 2017 (perhaps) while further rate cuts remain on the cards in Brazil, Russia, Indonesia and India.
Higher global yields and still uncertain US election outcome are taming global equities and volatility has spiked but EM currencies have still managed to eek out modest gains.
Assuming Hilary Clinton wins next week, I would expect the initial reaction to be a rally in global equities, EM currencies and Dollar and an underperformance of safe-haven assets.
But I would also expect market pricing for a December Fed hike to rise a little further, which could in turn eventually curtail any rally in global equities and EM currencies.
In this scenario, the Dollar would likely end the year stronger, as per my January forecast of a third consecutive year of albeit more modest Dollar gains.
Whether global risk appetite avoids its early 2016 fate will depend on the interconnected factors of underlying macro data and the Fed’s credibility. In any case, market volatility could spike in the run-up to March 2017.
The self-reinforcing sell-off in Sterling and UK bonds has only very recently abated, with markets seemingly taken some comfort from a number of factors including the only modest slowdown in UK GDP growth to 0.5% qoq in Q3.
But optimism over UK GDP data is not warranted as growth has become more unbalanced and slowed in August-September despite a significant easing in UK monetary policy.
As we head towards the second half of 2017 and the one-year anniversary of the UK referendum on EU membership, many themes which have pre-occupied financial markets in the past 12 months are likely to continue dominating headlines.
These include Donald Trump’s US presidency and its longevity, merits and scope for tax reforms and infrastructural spending, Brexit negotiations which officially started on 19th June and the resilience of the ongoing recovery in global GDP growth.
Global GDP growth rose modestly in Q1 2017 to around 3.12% year-on-year from 3.06% in Q4 2016 and a multi-year low of 2.8% yoy in Q2 2016, according to my estimates.
But the global manufacturing PMI averaged 52.7 in April-May, down slightly from 52.9 in Q1 2017, suggesting global GDP growth may not have accelerated further in Q2. This could in turn, at the margin, delay or temper policy rate hikes and/or unwinding of QE programs.
Non-Japan Asian currencies have in the past month been even more stable than in the preceding month, in line with my expectations, but a more pronounced policy change – particularly in China – remains a possibility.
Other themes, such as the timing and magnitude of higher policy rates in developed economies and falling international oil prices, have recently come into clearer focus and will likely be of central importance in H2.
For the UK, I am sticking to my view that a 25bp policy rate hike this year is still a low probability event and I see little chance of an August hike.
The uncertainty over the MPC’s interest rate path and the government’s stance on Brexit complicate any forecast of Sterling near and medium-term but I continue to see the risks biased towards further depreciation.
In France, the hype surrounding Emmanuel Macron’s presidential and legislative election victories is already giving way to whether, when and how smoothly the LREM-MoDem rainbow government can push through its reformist agenda.
Finally, while most European elections are now thankfully behind us, European financial markets are likely to attach great importance to the outcome of Germany’s general election on 24th September.
Conversely, the burning topic of rising European nationalism and future of the eurozone/EU has lost traction following recent presidential and/or legislative elections in France, the UK, Netherlands and Austria.
there will be 2 articles attached may you please summarize the artic.docxbarbaran11
there will be 2 articles attached may you please summarize the articles attached seperatley and add a bibllography and opinion to each (must be at least 2 pgs double spaced)
Japan’s Swinging Bonds — A Future Economic Crisis
ARTICLE
COMMENTS (1)
BONDS
JAPAN
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By Vincent Cignarella
The inability of Japanese government debt to stop gyrating wildly poses a significant threat to the country’s climb out of its two-decade economic mire.
In the past six months, Japanese 10-year bond yields have swung like a pendulum. The huge swings were never more prescient than Thursday, when the yield jumped over 1.0% for the first time in over a year.
That volatility poses a significant threat to Japan, specifically through the balance sheets of its banks. In a statement clearly acknowledging those risks, Bank of Japan Governor Haruhiko Kuroda said Friday that it is “extremely desirable” for the nation’s debt market to be stable.
When it comes to government debt, Japan’s biggest banks are all in. Consolidated financial statements of
Mizuho Financial Group
8411.TO
0.00%
and Mitsubishi Financial Group show they each hold 23% of total assets in Japanese national government and a variety of government agency bonds.
As that debt vacillates in price so do the banks’ Tier 1 capital asset ratios and presumably their ability to lend and create loans. Japanese banks would face 6.6 trillion yen in losses should interest rates rise broadly by one percentage point, according to the Bank of Japan.
One week into 2013, 10-year government bonds climbed in yield to nearly 0.85% from early December lows of 0.69%. They then fell dramatically to 0.44% in early April only to climb again violently to the 12-month high on Thursday. All that interest rate volatility and so far, no inflation in sight.
Recent gross domestic product figures from Japan showed growth of 3.5% on an annual basis but the GDP deflator, a measure of inflation printed at a decline of 1.2% from a year earlier. That is 14 consecutive negative quarters.
If these government bond yields continue to gyrate beyond the central bank’s control and no inflation comes, the government stands to lose credibility domestically.
That credibility is already somewhat in question given during his first term as prime minister, Shinzo Abe lacked the political power to follow central bank action with his own government reform. Without that reform, Abe’s goal of 2% inflation within two years is in grave peril.
If he has any doubts about the need for government action, look no further than U.S. Personal Consumption Expenditures, the Federal Reserve’s favorite indicator for inflation, was 2.5% in 2008 before the global financial crisis took hold. Now almost five years later and massive quantitative easing from the Fed, the PCE is just 1.1% because there has been no help from fiscal policy.
The importance of credibility is even greater in Japan, where local investors finan.
French politics, UK macro data and possible GBP/EUR downsideOlivier Desbarres
• The GBP/EUR cross is at year-highs but continues to struggle to breach the 1.20 mark, as it did on a number of occasions in the second half of 2016.
• Sterling has been buoyed by British Prime Minister Theresa May’s call for early general elections on 8th June while the euro remains in reasonably narrow trading ranges as we head into Sunday’s French presidential election first round.
• With four presidential candidates polling between 18.5% and 23.5%, it is still a close call.
• But I am sticking to my core scenario that independent centre-left candidate Emmanuel Macron will fill one of the top two spots to make it to the 7th May run-off, which I my view would be welcomed by French financial markets and the euro even if markets remain jittery over the next fortnight.
• At the same time, the ever-changing political scene in the UK can do little near-term to avert the headwinds to GDP growth stemming from falling real wages and retail sales.
• With this in mind, I see the risk to GBP/EUR biased to the downside in coming weeks, particularly if both Macron and Republican candidate François Fillon earn their place in the second round.
The past year has been remarkable with political precedents set in the US, UK and France, still record-low central bank policy rates in most developed economies and financial markets and macro data at all-time or multi-year highs (and lows).
Standpoint: Global Reflation by Kevin Lings STANLIB
Fears of sustained deflation and stagnant growth in the United States and Europe have been replaced by a more optimistic growth outlook as well as concerns about rising inflation. This has driven developed market equities higher, but also weakened major bond markets.
This month’s update is longer and contains more geopolitics than usual. This is because, for the first time in two generations, the economies of every country in the world are growing (with the possible exception of North Korea). This synchronised global upswing presents new risks and uncertainties.
http://www.jsacs.com/
Degroof Petercam Asset Management's chief economist and asset allocator look into whether the reflation trade is for real and inflation is back in the cards.
Weekly Forex News March 3rd 2013 FCTO The Dollar continued to be the strongest major currency last week while the Euro was the center of attention. Inconclusive elections in Italy left the country with a hung parliament and possibly with much political uncertainties for months that would hamper reforms. Solid bond auctions in Italy gave the common currency some interim support but it finally gave up again with EUR/USD briefly breaching the key psychological level of 1.3. The situation in the Euro reminded us how vulnerable the confidence towards the Eurozone is despite all the efforts by the European Central Bank and political leaders. We could look at EUR/CHF: which was back below 1.21 at the start of 2013 then shot up to as high as 1.2568 and was hammered back to as low as 1.2118 within just two months. While the US was troubled by the so called sequestration the dollar was not that affected based on its save haven status. The Dollar index surged through 82 to close at 82.28 while US stocks managed to reverse earlier loss and close on a strong note.
1. Three Month Market Outlook EUR/USD
04/03/2016
Submitted to: Marie Finnegan
Submitted by: Ronan O’Donnell
2. Three month market outlook for the EUR/USD
Introduction
The following report is based on analysis of the next three months market outlook of the Euro
and Dollar currency. Its purpose is establish weather myself an importer of American
specialist’s cars should complete an order of cars worth $5 million using the forward rate or
the spot rate. To come to an accurate decision a fundamental and technical analysis will be
carried out to protect myself against any adverse fluctuations in the currency markets and
determine whether to buy $5million now using the forward rate of $1.133 or use on the
current spot rate on the 1st of June to complete the transaction. The report will then produce
an overall assessment of the market based on the technical and fundamental analysis and plan
its recommended trading strategy.
After producing this report, I am bearish the euro/dollar at advise on going with the current
forward rate $1.133 due to uncertainty in the global economy. The reasoning behind this
decision will be explained in the report.
Fundamental Analysis
The fundamental analysis will focus on four key areas Political Stability, inflation,
purchasing power parity and interest rates. Each area will be discussed from a European and
American point of view to reflect their current situations.
Political Stability
Europe:
There is one major political concern currently in Europe and that is weather Britain will vote
yes to stay in the European Union or No to leave. The referendum will be held on the 23rd of
June 2016 in the lead up markets will become nervous which will result in a drop in
investment caused by the uncertainty of the result. It’s anticipated to be a very close vote
which could go either way. A major concern for the European Union is that a referendum to
leave is unprecedented and if Britain do successfully leave the Euro area it may open the door
for more countries to potentially leave and weaken the euro. (Wright, 2016)
The momentum is with the Brexit campaign which has the backing of six of David
Cameron’s cabinet ministers that have judged the deal for Britain to remain in the European
Union as not good enough. The very influential Mayor of London Boris Johnson has also
3. show his support for the Brexit campaign by backing “the vote to leave”. The markets reacted
and the euro strengthened against the pound as a result. (Jamieson, 2016)
America:
Barack Obama is coming to the end of a successful term in office where the unemployment
rate has been reduced to 4.9% this is the lowest figure 2008 and 14 million jobs have been
created since he took office. Barack Obama provided America with a stable government that
was able to kick start the economy after the recession through smart and creative policies.
(Whiffin, 2016)
The current election race for the next American President is very hard to predict but their two
front runners for their respective parties are Donald Trump (Republicans) and Hillary Clinton
(Democrats). Donald trump as president would be unstable and not able to reassure markets
of his success because of the many variables associated with him as president such as
deporting all immigrants, placing tariffs on all imports and unsustainable spending. Hillary
Clinton is a stable candidate with a solid a campaign message that would provide a stable
government. The markets would react positively to Clinton as president. (Eagn, 2016)
Inflation and Purchasing Power Parity
Europe:
The slowdown in emerging economies and low commodity prices is causing major problems
for the recovery in the Euro Zone. This has led to The European Central Bank having to
revise its growth expectations for 2016 and warning that inflation may be slower than
expected. Throughout 2015 headline HCIP in the euro area was very low. Consumer prices
dropped from 0.3% in January 2016 to -0.2% in February. This is the first negative figure
since September when it was -0.1%. In the chart below the European inflation rate is
displayed which has been very volatile over last year. It has dipped into negative inflation
three times over the last year.
4. Core inflation in the Eurozone fell to -0.7%. A major influence on inflation is the falling
prices in the energy sector which have decreased by 8%. The Euro Zone is trying to deal with
variables such as the economic slowdown in China, the uncertainty closer to home associated
with terrorism, and a surge in the number of refugees entering Europe which may have an
adverse effect on inflation. President of the European Central Bank, Mario Draghi has said
that the ECB will review the situation at their next meeting in March and act if price stability
in the Euro Zone is threatened. (Draghi, 2016)
The purchasing power parity for the 28 countries of the European countries is 0.745. The
figure is considerably lower than the pre-recession figure of 0.820 in 2007. This has resulted
in a devaluation of the Euro vs the Dollar and many other currencies. This has benefited
Europe exports which have become more competitive. Exports have been aided by the
weaker purchasing power parity and price of oil. (OECD, 2016)
5. America:
Inflation in the United States is expected to remain low in the next couple of months. The
inflation rate in United States is currently at 1.4%. It is not increasing faster due to the low
energy prices. The chair of the Federal Reserve Janet L. Yellen stated at a recent FOMC
meeting that she expects inflation to reach its 2% objective over medium term. We can see in
the chart below that the US inflation rate has been rising at a steady rate since October 2015
and is on course to reach the 2% objective later in 2016. (Yellen, 2016)
The purchasing power parity of the dollar has increased. The dollar is expected to appreciate
further against world currencies in 2016. This is as a result of the strong economic growth in
the US economy. The stronger purchasing power of the dollar has seen many US
multinationals increase their foreign direct investment in European countries such as Ireland
and Poland, the appreciation of dollar has made exports less competitive. (Bilton, 2016)
Interest Rates
Europe
European central bank has set interest rates low in the euro are in a bid to kick start the
economy. The ECB has decreased its deposit rate to -0.3% and left the refinancing rate
unchanged at 0.5% to encourage banks to lend money out and not hold onto it. The chart
below illustrates that the ECB has been constantly reducing interest rates as it seeks to
maintain price stability but also ensure the euro zone recovers from the recession. (ECB,
2016)
6. The ECB is also engaged in quantitative easing to the tune of €60 billion a month which may
be extended beyond March 2017. To combat the increase in downside risks due to volatility
regarding economic outlook of key emerging economies, heightened world financial
uncertainty and geopolitical risks. (Lewis, 2016)
America:
In December the FOMC decided to increase the federal funds rate from 0.25% to 0.5% this is
the first increase in the federal funds rate since 2006. The funds rate increase due the strong
performance of the labor market and it is expected inflation will reach its 2% objective.
Further increases in the federal funds rate have not been ruled out in 2016 in the most recent
form meeting the fed said that it “expected to increase interest rates gradually”. (Appelbaum,
2016)
Technical Analysis
The technical Analysis will cover four time periods 6 months, 1 year, 3 years and 5 years,
providing information on moving averages, support and resistance lines. A mixture of
candlestick charts and line charts will be used over the time periods to interpret the
information. Moving averages have been used on all graphs to represent the daily changes in
the euro/dollar. All charts used in the he technical analysis have been taken from the financial
times interactive charts. (charts, 2016)
7. 6 Month Technical Analysis
Chart 1
In chart 1 the euro/dollar starts off on an upward trend from $1.12 which peaks a $1.15 on the
7/10/2015.This peak is followed by a downward trend which bottoms out at $1.06 on the
2/12/2015. The euro rallies strong against the dollar on the 03/12/2015 to close up $1.09 the
euro has broken through its old resistance to create a new support level of $1.07 and a new
resistance $1.10. The new levels of support and resistance has not changed from December
2015 to March 2016.
8. Chart 2
There is several crossovers on chart 3 above which represent moment shifts in the euro/dollar
when it is strengthening and weakening. The latest crossover took place on the 29/02/16 it was
a downward shift for the euro/dollar.
9. 1 year TechnicalAnalysis
Chart 3:
In the chart 3 we can see that euro/dollar was very unstable from March 2015 to December.
In the first three months of the year there was three downward trends that where of offset by
up wards trends. In October there was a sharp downward trend. The euro/dollar established a
sideways trend to aid the support and resistance.
Chart 4:
10. In chart 4 there is a double bottom for euro/dollar between March and April 2015. The
euro/dollar has tried to lower that support but bounced off it. After the second bounce the
euro/dollar enters into an upward trend. There is two head and shoulders in March and October
that are below the resistance line and represent a downward trend in the euro.
3 year Technical Analysis
Chart 5
In chart 5 we can see that the first two crossovers April 2013 and December 2013 represent a
positive momentum shift for the euro/dollar. This is followed up by negative momentum shift
in April 2014 where euro enters a downward trend and does stabilize until April 2015 and
continues to fluctuate between positive and negative momentum shifts in the euro/dollar.
11. Year 6 Technical Analysis
Chart 6
In chart 6 we can see the beginning of a downward trend that last from June 2011 until July
2012. This is followed by upward trend which does not reach the previous high of June 2011.
The euro/dollar enters into a sharp downward trend in February 2014 and fails to recover.
Market Overview
The findings of the fundamental and technical analysis in this report on the Euro/Dollar
currency. Have highlighted the global economy plays a major part in the exchange rate
factors out of the control of the ECB and FED such as the low price of oil, slow economic
growth in emerging economies and the poor economic performance of China are key
influencers of the exchange rate. There is also the impending referendum in Britain which
poses concern to markets and investors.
The fundamental analysis in this report highlighted that the ECB is struggling to reach its 2%
target with inflation currently at -0.2%. The ECB has reacted with negative interest rates and
a stimulus program which is due to last until March 2017. The Fed is on target reach its 2%
12. inflation target over the medium term with inflation currently standing at 1.4%. The Fed is
completing raising federal funds rate for the second time in a year. The American economy is
performing strongly especially the labor market.
The technical analysis in this report of the euro/dollar exchange rate highlight past price
movements in the exchange rate. The report was able to clearly identify that there is
downward trend in the euro/dollar with a lack of investors buying in the market the supply
demand is expected to weaken further.
Recommended Trading Strategy
After producing this report I have come to the decision that I am bearish the euro/dollar based
on the fundamental and technical analysis I believe that the euro/dollar will have depreciated
below the expected forward rate of $1.133 in the next three months. There is just too much
uncertainty surrounding the global economy currently and I expect a few a shocks to test it
further between now and the 1st of June. I believe that the euro will be around the $1.07 –
$1.09 in three months time. This why the recommended trading strategy is to purchase the $5
million dollars now using the current forward rate.
13. Bibliography
Appelbaum, B., 2016. New York Times. [Online]
Available at: http://www.nytimes.com/2016/01/28/business/economy/fed-interest-
rates.html?_r=0
[Accessed 29 02 2016].
Bilton, J., 2016. Financial Times. [Online]
Available at: http://www.ft.com/intl/cms/s/0/6f057844-a7f4-11e5-955c-
1e1d6de94879.html#axzz41nYRdrPf
[Accessed 29 02 2016].
charts, F. I., 2016. Financial Times. [Online]
Available at: http://markets.ft.com/research/Markets/Tearsheets/Summary?s=EURUSD
[Accessed 04 03 2016].
Draghi, M., 2016. European Central Bank. [Online]
Available at: https://www.ecb.europa.eu/press/key/date/2016/html/sp160201_1.en.html
[Accessed 28 02 2016].
Draghi, M., 2016. European Central Bank. [Online]
Available at: https://www.ecb.europa.eu/press/key/date/2016/html/sp160204.en.html
[Accessed 28 02 2016].
Eagn, M., 2016. CNN. [Online]
Available at: http://money.cnn.com/2015/12/23/investing/donald-trump-stocks-markets/
[Accessed 29 02 2016].
ECB, 2016. European Central Bank. [Online]
Available at: https://www.ecb.europa.eu/stats/monetary/rates/html/index.en.html
[Accessed 28 03 2016].
Jamieson, A., 2016. NBC News. [Online]
Available at: http://www.nbcnews.com/news/world/pound-drops-london-mayor-boris-
johnson-backs-brexit-eu-n523376
[Accessed 26 02 2016].
Lewis, L., 2016. Financial Times. [Online]
Available at: http://www.ft.com/cms/s/2/7333e92a-d4a2-11e5-829b-
8564e7528e54.html#axzz41nYRdrPf
[Accessed 29 02 2016].
14. OECD, 2016. Purchasing power parities (PPP). [Online]
Available at: https://data.oecd.org/conversion/purchasing-power-parities-ppp.htm
[Accessed 29 02 2016].
Whiffin, A., 2016. Us labour market keenly awaited. Financial Times, 29 02, p. 1.
Wright, O., 2016. independent.co.uk. [Online]
Available at: http://www.independent.co.uk/news/uk/politics/eu-referendum-peter-
mandelson-breaks-silence-to-warn-over-effects-of-brexit-a6904216.html
[Accessed 27 02 2016].
Yellen, J. L., 2016. Federal Reserve. [Online]
Available at: http://www.federalreserve.gov/newsevents/testimony/yellen20160210a.htm
[Accessed 29 02 2016].