Orbex Q3 2021 Market Outlook Report

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Q3 2021 Market Outlook Report
The Light at the End
of the Tunnel
Access professional fundamental and technical
insights for the third quarter of 2021.
Forex, Metals, Indices, Energies, and Stocks
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Published in July 2021

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About Orbex
Orbex is an award-winning, fully licensed and regulated global forex broker, specializing in
the provision of access to the world’s biggest and most liquid financial markets. Orbex
boasts a world-class trading experience, providing fast and efficient 24/5 multilingual
support, exceptional trading conditions, and a wealth of educational material. Since its
founding in 2010, Orbex has focused on technological advancement and the superior
quality of its services. As part of our customer support program, we provide enhanced
security of client funds and high professionalism in confidential finance matters. Orbex
understands the value of rapid decisions in fast-paced financial markets. Therefore, we
ensure sharp execution, sound market analysis, and comprehensive trading education.
About the Research Team
Daniel John Grady
Market Researcher
Daniel John Grady is a financial analyst and writer. He is a
former CFO with a degree in Financial Management and has
been published in both English and Spanish. With over ten
years of equities trading experience, he is primarily interested
in emerging markets with a focus on Latin America.
Roman Onegin
Elliott Wave Specialist
Roman is a seasoned analyst who has been studying the
financial markets since 2008, specializing in various types of
technical analysis. Since 2012, his main focus has been Elliott
Wave analysis, a skill he has perfected thanks to years of
research and practice as an active EW trader.
Mohammad Al-Mariri
Head of Training & Market Strategy
Mohammad is a Chartered Market Technician (CMT), and a
member of the American Market Technicians Association
(MTA). He has over fifteen years of trading experience and has
developed an advanced approach to fundamental analysis
with a focus on risk management strategies.
David Kindley
Market Strategist
David is an experienced analyst with over 10 years of trading
experience in the financial markets. With a keen eye for
macroeconomics and a special focus on trading psychology,
David is passionate about helping everyday investors make
informed trading decisions through his thorough research and
analysis

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TABLE OF CONTENTS
Introduction
Executive Summary
The United States
US Index
Europe
EUR/USD
United Kingdom
GBP/USD
Switzerland
USD/CHF
Japan
USD/JPY
Commodity Bloc
Canada
USD/CAD
Australia
AUD/USD
New Zealand
NZD/USD
Equities
S&P500
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3
7
5
10
8
11
13
12
14
15
17
16
18
19
20
21
23
30
27
28
34
36
33
35
37
26
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Metals
Gold
XAU/USD
Silver
XAG/USD
Commodities
Crude Oil (WTI)
Natural Gas (NGAS)
Emerging Markets
USD/TRY
USD/MXN
USD/ZAR
Stocks
Proctor & Gamble (PG)
Moet Hennessy Louis Vuitton (LVMH)
Hyatt Hotels Corp (Hyatt)
PayPal (PayPal)
Tesla Motors Inc (Tesla)
Conclusion

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A Review on Q2 2021 and How Markets Could Perform
in Q3 of 2021
Our Investment Research team proudly presents our Quarter 3 outlook report, reviewing
global economies in Quarter 2 of 2021 and examining the likely trend themes for Forex,
Indices, Metals and Energies, and Stocks. Analysing asset prices, patterns, and structures, our
professional market analysts construct a comprehensive forecast emanating from market
cycles and how historical data and policy signals can impact the financial markets.
Introduction
The third quarter of 2021 could finally be the first time in well over a year that covid finally
stops being the main theme for the markets.
The pandemic is still likely to play a significant role for the foreseeable future, but the hope
is that the recovery is established enough in Q3 to allow the markets to turn their
attentions back to other things.
The main talking point over the next quarter is likely to be policy normalization. Some
central banks have already moved to raise rates. In fact, major central banks are expected
to solidify some kind of timetable for when to cut back on asset purchases as the first step
towards policy normalization.
A significant component of that discussion will be balancing the market fears over inflation
and the potential impact higher prices would have on the still uncertain recovery.
While markets might be breathing a sigh of relief that the pandemic seems to be over, the
issues that had existed pre-pandemic may now come back to the forefront. We should
remember that many economists were already forecasting a recession for last year, and the
question now is what the pandemic has done to the underlying economic fundamentals.
In addition, lingering geopolitical issues that were put aside in the global emergency might
start to reassert themselves as world leaders can finally resume talks in person.
Already, there is a proposal for a new global tax regime, which could have further effects on
the markets as we get more details later in the year.
For now, China, Russia, Brexit, the Middle East, and OPEC, are all expected to be market
players. The question is how traders can best position their portfolios to maximize their
returns.
Executive Summary
Two roads diverged in a yellow wood
Q2 was largely seen as a time for the global economy to return to its stride.
Some of the initial kinks in the vaccine rollout were smoothed out, and significant advances
were achieved by lifting lockdowns.
The quarter sort of set up the runway for take-off. There are still a few obstacles and risks
left to overcome before finally putting the threat of covid behind us. However, we can
expect those risks to diminish over the coming months. That said, this opens up a whole
new range of possibilities and, yes, more risks.
The Fed has finally come around to talking about tapering but remains very cautious about
avoiding a second taper tantrum. In fact, central banks in general are evaluating how best
to normalize policy.
Meanwhile, economists continue to be divided on a number of issues. These include the
effect of the massive global stimulus on the economy, how fast we could see the recovery,
and what could happen with inflation.
Commodities had been seen as a hedge against the effects of inflation, reaching new highs
during the last quarter. But they suffered a blow as China started to take an aggressive
stance to tame the price of raw materials. Meanwhile crude prices continue to rise as a
potential deal with Iran gets delayed, despite hope from both sides to complete it by the
end of July.
Although the divorce between Britain and the EU was finalized at the start of the year,
problems between the two persist. A blockade of fishermen in Jersey, and disagreements
on sausage regulation in Northern Ireland, were mere symptoms of the underlying tension
that still needs to be resolved. Even US President Biden stepped in to try to solve the issue.
Throughout the next few months, most of the world's restrictions over covid are expected
to be lifted. So much so that travel might finally start to ramp up again.

The US, Britain, and Europe remain on track to reach their vaccination targets in Q3,
although now, the issue of vaccine hesitancy has slowly come to the forefront. Press
reports of side effects after hundreds of millions of doses of the vaccine have been
administered aren't helping to curb public apprehension.
With vaccination rates below what most experts agree is the herd immunity threshold, the
potential of another outbreak looms. The worst fear is a mutation of the virus that evades
the vaccine, which is more likely if a large number of people have not been immunized.
Notwithstanding the potential risks, markets still seem eager to take on risks. Bond yields
had been slipping through the quarter but moved higher after the Fed signaled in late June
that they were finally looking into policy normalization sometime in the future. Valuations
remain near the highs of the prior crises, as the move from growth stocks to value stocks
intensifies.
Forex is likely to play a key role in the markets as the different stimulus approaches across
the globe have disparate effects on inflation, and investors jockey to get the best return on
their money. The diverging views on inflation expectations for the rest of the year might
prove to be a defining theme of the currency markets and global capital flows.
Commodities started the year heading for a new supercycle, but there have been concerted
efforts at a policy level to try to curb the rise. Higher commodity prices could be expected to
eventually filter through as higher inflation, and could even threaten the nascent recovery.
Meanwhile, crypto, meant to replace gold in many ways, has had a very difficult quarter. With
higher borrowing costs expected in the future, only the most diamond of hands might be
looking to keep hodling.
The quarter starts with renewed optimism among investors, but with deepening
differences in terms of what to expect. On the one hand are the traders who expect a full
rebound and normalization, with inflation coming quickly under control. On the other are
those that worry that the high debt, stimulus spending and a lack of structural reforms are
setting the stage for a prolonged period of stagflation.
Through the coming months, we will have mounting data for which road will turn out to be
right. Meanwhile, traders need to keep their eyes open and their ears to the ground to make
sure they have the latest data and analysis to help determine which is the right path forward.
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The United States

The United States
Is US inflation really temporary?
With the start of the 3rd quarter of 2021, many economists are concerned that the US is
entering an era of permanently higher inflation. But Treasury Secretary Janet Yellen and
Federal Reserve Chairman Jerome Powell believe the current rise in prices will be temporary.
That said, traders are not as interested in coming down on either side of the debate; we are
more interested in how to set up our portfolios for profitability.
To make matters easy, both sides agree that inflation will likely be higher next quarter as
the economy completes its reopening. Even the most optimistic forecasts for when
inflation could normalize are not until the latter part of the year. Therefore, many traders
are looking to set up inflation trades for now, and then adjust as we get more clarity as to
what will happen to inflation later on.
The best forecasters are almost certainly on Yellen’s side. That includes the people
responsible for the leading macro-econometric models at the Federal Reserve, the Council
of Economic Advisers, and Wall Street banks.
For example, the consensus of leading forecasters sees a notable pickup in inflation this
year, assigning a 42% chance to exceed 3% in 2021.
But 2022 is a different story. Analysts are posting only a 7% chance that inflation will be
that high next year. So, in effect, they think Yellen has a 93% chance of being right. They also
predict a 44% chance of inflation being below 2% next year to reinforce the point.
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These elite forecasters are also seeing a 5% chance of the high-inflation scenario for next year.
Another factor to keep in mind is that the US federal deficit is still broadly in line with
trends. Even though the monetary base has expanded by 32%, saving rates remain high.
And the bulk of the massive stimulus spending is still winding its way through the
bureaucracy, as "shovel ready" projects are hard to find.
At the same time, some inflation is expected as the economy reopens and many of the
hardest-hit sectors, from hotels to airlines, see their customers return. From
semiconductor-chip shortages to container-shipping delays, a variety of supply-side
chokeholds are also putting upward pressure on prices.
Many common products are seeing prices rise, with most consumer staples companies
forecasting further increases later in the year.
The evidence from other countries provides further perspective on whether America’s
disproportionately strong fiscal response is the primary driver of current inflation. This, in
turn, could indicate whether it will become permanent.
Inflation has been rising in G-7 countries and the euro area, and most of this increase
seems unrelated to the countries’ drastically different fiscal responses.
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DXY

Europe
Europe
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Eurozone
When can the ECB end the bond-buying program?
European Central Bank tensions over how and when to discuss ending its emergency
bond-buying program are starting to seep out into the press.
Not long after President Christine Lagarde said in an interview that it is “far too early” to
discuss when to end the stimulus, Austrian central-bank Governor Robert Holzmann said the
program would end in March unless there is another severe wave of coronavirus infections.
According to Holzmann, the bond-buying program “was established and voted for to end by
March 2022, and for the time being, if nothing changes in the sense that there is no fourth
or fifth confinement, it will end."
Further pressure was added late in the quarter as the Fed formally announced they were
"talking about talking about" raising rates. Generally, economists expect that the Fed will
bring rates higher post-recovery. With talk of the Fed raising rates as early as 2022 from
members of the FOMC, this could put pressure on the ECB to bring forward its calendar for
policy normalization.
The European Central Bank is entering a tricky phase of the crisis. The economy is starting
what looks like a strong recovery as infections drop. However, companies and households
are still reliant on support.
The ECB has pledged to keep financing conditions favorable as long as is needed, and most
policymakers have avoided talking about an exit for fear of driving market rates higher.
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Helping the common central bank to gain time, however, is that inflation pressures remain
lower than across the Atlantic.
ECB officials pledged last week to continue bond-buying at a faster pace through the third
quarter, even as staff raised their forecasts for the region’s economy. They now see risks to
the outlook as “broadly balanced” for the first time since December 2018.
While the ECB remains alert to the risks of a premature tightening in monetary conditions,
the Governing Council is becoming more confident about the economic outlook.
In addition to the brighter risk assessment, GDP growth forecasts were raised substantially
from March for this year and next. The figure for 2021 was lifted to 4.6% from 4%. For 2022,
the numbers went to 4.7% from 4.1%.
The number for 2023 was unchanged at 2.1%. However, the changes to the medium-term
forecasts for inflation were moderate. The core reading for 2023 nudged to 1.4% from 1.3%.
As for short-term inflation, forecasts were raised more substantially, reflecting a more
significant contribution from energy prices as well as temporary pressures from supply
bottlenecks.
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Switzerland
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Switzerland
Has the time for risk finally come?
One of the currencies that could be negatively impacted by the end of covid is the Swiss
franc. During the pandemic, investors headed for the refuge of the Alps. But now that
economies are normalizing and there are more investment opportunities, we could expect
increased flows out of Swissie-denominated assets.
This might prove some relief for the SNB, but not so much that they will change policy in the
next quarter. The EU remains Switzerland's largest trade partner, and the economy is
expected to mirror that of the trading block for the next three months. In fact, Switzerland
is expected to complete its vaccine program in September, just like the rest of the continent.
On the other hand, the Biden Administration's proposal for a minimum corporate tax is
likely to dominate headlines and weigh on Switzerland's generally good financial status.
The US is also expected to affirm Switzerland's reputation as a currency manipulator.
However, the SNB will likely keep policy steady through the third quarter. As a result, the
Swiss government expects the economy to grow by 3.6% this year. While this is above the
average, it's below the 4.2% expected for the eurozone. On the other hand, expectations are
for Switzerland's inflation rate to stay near flat for the year.
The franc is likely to be buffeted primarily by inflation expectations among its trading
partners. Both the EU and the US central banks admit that they see inflation rising in the
near term. But, they expect it to moderate through the course of the third quarter.
If inflation were to keep moving higher in the coming months, demand for the franc could
return with renewed vigor.
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Commodity Bloc

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Canada
A possible inflation play?
Potentially one of the better performers among commodity currencies, Canada's economy
continued to grow despite still having lockdowns at the start of the quarter.
Moreover, as crude prices rose well above pre-pandemic levels and production was
unaffected by covid, Canada's economy substantially boosted following supply issues in
the US.
That boost from crude prices is expected to continue as many analysts expect WTI to
potentially reach $80/bbl by the end of the year. In addition, OPEC+ appears to have formed
a consensus around having higher production, while the world's largest producer is
reluctant to offer new permits under the new administration.
Canada's Conference Board expects the economy to grow by 5.8% this year, which is slower
than the 6.6% forecast for the US. On the other hand, the OECD projects Canada's inflation
rate to be just 1.8% compared to 3.7%.
This is good news for the BOC, which has insisted that inflation will remain under control
despite its accommodative stance. However, the bank has already pulled back expectations
of a rate hike to the end of 2022 instead of 2023. In addition, the BOC has a rosier outlook
for the economy than the private measure, forecasting GDP to come in at 6.5% this year.
The CAD has accumulated several expectations for tailwinds, including increased
speculation that the BOC will end its asset-buying program sooner than initially expected.
There is also the expectation that energy prices will remain high in the medium term.
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Australia
Australia falling behind after vaccine rollout issues
Australia's initial plan to wait until after production had ramped up to get its vaccine
program underway seemed like a good idea at first.
The island nation had managed to keep case numbers low, allowing the domestic economy
to return to relative normality. The original plan was to have the population vaccinated
throughout the winter, completing the program by September. However, halfway through
the program, it remains woefully behind. At the current rate, Australia may not achieve its
immunization program until May of 2022.
Most other major economies are expected to have completed their vaccine programs long
before then, leaving Australia behind in reactivating its tourism industry. This could have
further complications for the housing market, which relies heavily on foreign investment.
On the flip side, slow economic growth could mean that the RBA keeps rates low for an
even longer time, inflating what most acknowledge is a bubble in the housing market.
Australia's chief export - commodities - appeared to be reaching a peak at the end of Q1.
This suggests that, at best, Australian exports could be flat for the coming months.
A consensus of forecasts shows that while China's economic growth is still strong, it is
expected to slow in H2 of 2021, with the world bank forecasting China’s growth at 8.5% this
year. This would likely sap demand for raw materials, impacting the Australian economy.
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The Australian dollar seems to be sailing into headwinds. The RBA did raise their GDP
outlook for the year to 4.75% compared to 4.5% in prior estimates, and even slower in the
second half. The consensus is, therefore, that the RBA will keep rates and asset purchases
in place for the rest of the year.

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AUD/USD

New Zealand
New Zealand Looking ahead to economic normalization
As was anticipated, the second half of New Zealand's summer was better than the first
part. Optimism returned following the announcement of covid vaccines becoming available.
As a result, New Zealand was able to bring some of its tourism back thanks to a travel
bubble with Australia, but it was well below pre-covid levels. Nevertheless, New Zealand is
on pace to reach its vaccination targets by September, allowing it to welcome tourism back
next season.
Usually, the economy is slower during the third quarter of the year, as the two largest
industries in the country wait out the winter and get set up for spring. Meanwhile, rising
house prices and inflation concerns are putting pressure on the RBNZ to raise rates.
However, the bank has promised to remain "patient" and stick to a low policy for the rest of
the year. Bond markets agree, with a rate hike not pencilled in until mid-2022.
The RBNZ acknowledges that inflation is creeping up but still insists it will be transitory. The
rebound in the economy has helped unemployment stay low, as well as the government
increase spending. Some analysts are factoring in the possibility that the RBNZ might raise
rates sooner than anticipated and pull the NZD higher through the quarter.
Potential headwinds include an expected slowing of growth in China, New Zealand's largest
export destination. On the other hand, dairy prices are forecast to remain high as
production in Brazil, and Argentina remains affected by covid.
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NZD/USD

Europe
The United Kingdom
Equities
23

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SPX500
All eyes on the expected taper
As expected, the S&P 500 broke the 4,000 level on the first day of the quarter. However, it
has had difficulty making substantial headway beyond the 4,200 as higher yields and
worries about the potential impact of increased corporate taxes took their toll.
The themes that kept equities under pressure during the last quarter are expected to
continue for the rest of the summer. This is despite the hopes for better economic data.
Investors are continuing the shift from high-growth tech stocks to value stocks, dragging
on the higher-weighted index components. Most analysts foresee that the Fed will start
hinting at a potential tapering of their asset purchasing programs in the August or
September meetings. However, the actual taper is not expected until the start of next year.
The Fed is cautious to avoid another 'taper tantrum', and will likely do so by slowly breaking
the news to the markets over an extended time.
Meanwhile, we can expect inflation concerns to roil markets. While companies with larger
market shares can adjust prices to reflect increasing costs, smaller but faster-growing
companies might see their profits impacted. And if inflation gets too high, it could change
the expectations for when the Fed will begin the taper and further weigh on stocks.
As for the covid impact, vaccine hesitancy is starting to become the theme. The US is
speedily approaching the July 4th goal set by President Biden to get enough immunization
to fully reopen the economy.
Press reports of new variants have had less impact on markets, as studies show that current
vaccines are effective against them. However, there can be no guarantee that a new variant
that will bypass the vaccines will not be discovered, which keeps equity investors on edge.
Furthermore, the OECD plans to apply taxes to large multinational corporations, specifically
tech giants, boosted after the Biden Administration proposed a minimum global corporate
tax rate at the G7.
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Although not likely to come into effect for some time, continued media coverage might
accelerate the shift from tech towards value stocks, keeping the index under pressure.
However, political wrangling could provide a potential upside as it appears increasingly
likely an infrastructure spending package might be approved in the coming months.
Additionally, a lack of lift-off in the labor market might give investors the idea that the Fed
will hold off on tapering.
In summary, although the economic reopening suggests that equities should get a boost,
there is an array of obstacles the S&P 500 will have to navigate if it will reach new record
highs.

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Natural Gas
Likely to benefit from increased energy demand
Natural gas prices have been unseasonably high, continuing their upwards trajectory since
July of last year. A combination of factors have conspired to keep the price moving higher,
not all necessarily related to demand.
General dollar weakness due to lower interest rates through the quarter, and the
expectation of prolonged easing from the Fed certainly had a role to play. However, the
hawkish tone from the Fed at the end of the quarter didn't do more than provide a minor
respite in the price climb.
Inventories have continued to trend downwards, as the US grid is forced to use more
peaking power due to unusually hot weather combined with many generators out for
maintenance. Additionally, the expectation of less fracking in the coming years is expected
to keep natural gas supplies low.
The restrictions on production of crude are expected to keep the price of energy high in
general, meaning that there is less possibility to substitute for cheaper alternatives. Then
we have the factor that consumers are expected to start buying near the end of the quarter
as we approach winter demand. Following the results of last winter, utilities are likely to
want to maintain increased reserves this time around, and that buying might also support
the price through the coming months.
On the risk side, a deal with Iran could finally push crude prices down somewhat, and drag
natural gas down in sympathy. However, it's possible that it could be offset with a weaker
dollar in the same period.
General economic trends suggest tailwinds for natural gas, which could be impacted by
geopolitical risks at any moment. Crucially, should the Fed come out even more hawkish at
their next meeting, energy prices might finally have a reason to turn around.
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NATGAS

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Emerging Markets

Emerging Markets
History repeats itself, but perhaps not this time
In general, emerging markets tend to move in tandem, largely reflecting risk sentiment.
However, in the post-covid environment, that trend appears to have been broken.
One of the major factors is the respective vaccination rates. But another key aspect is
political considerations.
Historically speaking, a low interest rate environment coupled with significant quantitative
easing would have led to the expectation of better performance in emerging markets as
investors searched for yields. A recovery in the US while emerging markets were yet to pick
up the economic pace would also weaken the greenback while allowing traders to get in "at
the bottom" of the recovery elsewhere.
The trend in the ZAR and MXN has generally maintained a relatively stronger theme over the
last quarter. However, the TRY has gone in the opposite direction.
The constant replacement of the head of Turkey's central bank has shaken confidence in its
independence, despite rising rates. Meanwhile, geopolitical concerns keep foreign investors
wary, despite improving economic growth.
Turkey only just managed to avoid technically falling into recession during the covid crisis.
And its economy is expected to have accelerated during the quarter to 3.6%. However,
inflation is also likely to remain in the high upper double digits.
Despite this, the CBRT’s monetary policy has meant that Turkey has one of the highest
interest rates in the world in real terms. Inflation might have finally peaked during the last
quarter, and the lira could stage a comeback if inflation remains under control and the central
bank can reassure investors.
Another additional source of income for Turkey might be the return of the tourist season.
Turkey has a higher vaccination rate than Europe, from where most vacationers arrive and
are removed from the list of high-risk countries. As travel resumes across Europe, Turkey
could become an increasingly attractive destination through the quarter as case rates drop.
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On the contrary, the Mexican peso, has been able to recover so far this year, even as the
stock market moves higher. However, Mexico was already in a recession before the
pandemic started. But the high interest rates paid by government debt appear to continue
to attract investors.
Banxico is expected to keep rates at the current range for the rest of the year to support the
recovery, but bond yields remain at least two percentage points above the central bank's
target.
The Mexican peso appears to have stabilized in a range between 20 and 21, as investors
assess the economic situation in Mexico's largest trading partner. Initially, it was expected
that the Biden administration would relax trade measures. But, months after assuming
office, the rules set by the Trump administration remain in effect.
In fact, Biden officials quietly affirmed that they would focus more on enforcement of
existing rules than new trade agreements. Where Mexican exporters might find relief,
however, is in the massive government spending that is slowly ramping up in the US.
Increased spending on infrastructure, machinery, and electronics could imply higher imports
from Mexico. Additionally, the expectation of higher inflation in the US could help widen the
yield gap between the countries, making peso-denominated investments more appealing.
However, a remaining challenge for Mexico is the relatively slow vaccination rate, which
could leave the domestic market vulnerable to new lockdowns.
As for South Africa, the rand strengthened through the quarter on the back of improved risk
sentiment, which increased appetite for commodity currencies. The nation also benefited
from record-high commodity prices, which helped improve the balance of payments.
But the good news might be in the rear-view mirror. Commodity prices have started to
tumble as China signals that it is looking to open its strategic reserves. Additionally, South
Africa is going into the winter season, when respiratory diseases have a better chance of
spreading, and less than 3% of the population has received a covid vaccine.
Covid cases are again on the rise, indicating the start of a third wave, with new lockdowns, is
already in the works.

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Not surprisingly, in the final weeks of Q2, the SAR began to weaken, and there are several
indicators that this trend will continue through Q3. Fiscal policy ahead of covid put the
government in arrears, meaning that it had less room to supply stimulus for the economy
when the pandemic hit and has now had to turn to foreign aid.
While that might help the SAR in the short term, investors remain extremely cautious about
investing in South Africa, as evidenced by the enormous premium offered in government
debt.
With almost a third of the population unemployed, the country is facing a demand crisis as
it approaches a fiscal cliff. Inflation spiked in April as the government's debt-to-GDP ratio
spiked 20 percentage points. Manufacturing and mining slowed their pace of growth
through the second quarter, reducing the chances of an improving employment situation.
Even if the dollar continues to weaken through the coming three months, the ZAR could
have extreme difficulties gaining any traction. The SARB's expected interest rate hike might
not be enough to counter investor worries.
Turkey
Mexico
South Africa

https://www.orbex.com/blog/en/2021/04/usdtry-5
33
USD/TRY

https://www.orbex.com/blog/en/2021/04/usdmxn-4
USD/MXN
34

https://www.orbex.com/blog/en/2021/04/usdzar-4
35
USD/ZAR

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Conclusion
President Biden's target for the July fourth weekend to be the turning point for the
pandemic seems to be well on track. Thus, we can start the quarter on a positive note, as
other countries take the coming months to complete their vaccination programs and lift
travel restrictions.
While the debate persists on when to expect monetary policy normalization and interest
rate lift-off, it is still in a preparatory stage. The question is whether we will see significant
policy changes at the start or end of next year.
For now, stimulus remains in place allowing traders to potentially eke out some gains. But
the window is also closing, as traders look to position themselves for the post-recovery
period. Higher yields are expected to make value stocks more interesting, while inflation
concerns might bring back carry trading.
With world leaders having more confidence in their economies, geopolitical tensions are
back on the table. Biden pledged to try to cobble together a coalition to stand up to China,
but European allies seem reluctant to join beyond rhetoric. Meanwhile, Germany heads to
the polls, as the Presidential campaign in France heats up.
Covid headlines are going to continue to be an important player in market talk, but other
issues are likely to start to take more importance. Towards the end of the summer is the
final test to see if covid will return as autumn sets in.
The markets have a strong potential upside for this quarter, but always with an eye on
potential risks. We could also see the first signs of whether there are expectations of a
short-term inflationary spike, or a more long-term phenomenon.
In summary, the third quarter is likely to be dominated by the theme of consolidating the
recovery and getting ready to trade in the new normal.
As always, investors must continue to approach the markets with caution and trade responsibly.
37
Risk warning: This material is intended as information only and does not contain, and should not be construed as containing, investment advice or an investment
recommendation or an offer of or solicitation for any transactions in financial instruments. Past performance is not a guarantee of or prediction of future
performance. ORBEX does not take into account your personal investment objectives or financial situation. ORBEX makes no representation and assumes no
liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other
information supplied by any employee of ORBEX, a third party or otherwise. This material has not been prepared in accordance with legal requirements promoting
the independence of investment research and it is not subject to any prohibition on dealing ahead of the dissemination of investment research. All expressions of
opinion are subject to change without notice. Any opinions made may be personal to the author and may not reflect the opinions of ORBEX. This communication
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Orbex Q3 2021 Market Outlook Report

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