Market views for 2017 - page 4
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ECB to wait until after German elections for next policy move - Reuters
Sources story from Reuters
Nordea: British Pound Forecast to Recover Against Euro + US Dollar in 2017
After one of the worst years in its history, the British Pound could make a comeback in 2017 according to Nordea Market’s FX Strategist Aurelija Augulyte.
“2016 was a disaster for the GBP, as the unexpected Brexit vote knocked it off most since the Lehman crisis,” says Augulyte in a recent briefing to clients. "Next year it will stage a comeback.”
The Pound fell to multi-year lows against both the Euro and US Dollar amidst a free-fall in certainty and confidence in the wake of the UK's decision to exit the European Union.
The year ahead will be crucial for Sterling as it will start taking direction from the progression of Brexit negotiations.
Yet, Augulyte strikes a positive tone regarding the prospects for the UK currency on this front as she believes the worst is over.
In October the Pound was at its lowest as markets priced in a worst-case hard-Brexit scenario following Prime Minister Theresa May’s “Brexit means Brexit” speech at the Conservative Party conference.
These October lows should however form a baseline says Augulyte.
With talk of parliamentary involvement in the Brexit process and creative thinking in relation to transitional arrangements amongst senior Government leaders the prospect of a soft rather than hard-Brexit now looks likely.
Nordea's analyst also sees increasing political risk in the Eurozone – and Trumpomania - as overshadowing Brexit uncertainty in 2017, which will in all probability become ‘old news’.
“Now that the hard-Brexit has become a market’s baseline, should we shift towards a softer form of Brexit – avoiding an exit “cliff” with a transition agreement – the markets will be relieved. It could happen as PM May will deliver the Brexit plan before actually triggering Article 50,” says the strategist.
source
Fox's Turkey-Style Brexit Plan Brings Cheer to Sterling's Longer-Term Outlook
The Pound is set to rise against the Euro in 2017 with EUR/GBP falling to 0.8000 pence, from the current 0.8500, (currency pairs are always quoted in the units of the second currency in the pair), according to Xtrade’s Chief Analyst Paul Sirani.
Xtrade’s Sirani argues that the “dispersion” of forecasts for EUR/GBP, which is the widest in a decade at 0.73 – 1.00, is as a result of the unprecedented political risks in the UK and Eurozone.
“This dispersion is largely a function of today’s unprecedented political turmoil, whether you view Brexit’s tortured implementation path or the European political populism threat as the greater risk.
“Our view is that the muddle and uncertainty plaguing the British process is less threatening than the real and growing risks facing the continent, so look for sterling strengthening to some 0.8 £/€.”
Versus the Dollar he sees the Pound fairing less well as Donald Trump’s election boost the outlook for the US economy and the Dollar.
Mr. Fox Talks Turkey
The risk of a “Hard” Brexit has eased in the near term, according to analysts at Capital Economics, who argue that this may support Sterling in the short and medium term.
They say that whilst the possibility of a “Soft” Brexit option has diminished recently, the chances of a transitional Brexit buffer has increased.
The idea of a transitional deal was first raised by Brexit minister David Davis, who said that the UK could remain outside of the EU but pay for access to the common market.
This has since been adopted as a ‘transitional’ possibility whilst the niceties of Brexit are being hammered out.
Such a transitional deal would ensure the economy was not hit by a sudden Brexit as the UK would keep access to the common market.
“There are indications that the Government may be moving away from the recent “soft” Brexit rhetoric this week.
“But given the growing signs that it is also considering some sort of “transitional” arrangement for leaving the EU, this suggests that Brexit is unlikely to be both “hard” and fast,” said Capital’s UK Economist Ruth Gregory.
Recently Liam Fox floated Turkey’s model as a possible template for a UK transitional agreement.
“To recap, Turkey has tariff and quota-free trade with the EU on goods excluding agriculture, is part of the customs union and must agree to the trade agreements that the EU has negotiated with other countries.”
Turkey does not allow freedom of movement of EU citizens across its borders, however, nor does it pay nearly as much as member states into the EU budget.
However, on the downside, it cannot negotiate its own trade deals with other countries as an independent entity and must abide by the EU’s trade deals.
In addition, a Turkey-style deal would have the following drawbacks:
“The UK would have to impose common EU tariffs on goods from the rest of the world, reducing its ability to negotiate when striking new trade deals.
What’s more, this would do little to safeguard passporting rights for non-EU banks operating in the UK,” says Capital’s Gregory.
The Prime Minister Theresa May has also now discussed the possibility of an “implementation phase”, a sign it is being considered seriously by the government.
Unlike Liam Fox, the International Trade Secretary, May declined to offer a description of what such a transitional phase might look like.
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Will EURUSD reach parity?
In recent weeks the US dollar has gained the momentum against the euro and according to ING group they believe exchange rates could reach parity before the turn of the year. On Thursday the Euro reached fresh lows against the dollar when exchange rates reached 1.0364.
Dollar strength in line with Euro weakness is the reason why exchange rates have dropped. The Federal Reserve raised interest rates from 0.5% to 0.75% and have claimed its likely the FED will raise rates 3 times throughout 2017.
The ECB have announced they will be extending the Quantitative Easing program and therefore will be injecting another 540 billion euros into the economy. The theory behind Q.E is that more euros in circulation causes the euro to devalue however in the longer term it should help growth.
Outlook 2017: What To Expect From Oil, Gold, USD And FX
Without question, 2016 was the year of the big surprise. Or to be more accurate, surprises.
The biggest surprises were the Brexit decision in late June, when—despite all expectations to the contrary—the UK electorate voted to leave the EU, sending markets into a tailspin for a few days while pushing sterling lower. Then, just when markets appeared to have regained their footing, the US electorate provided the next, possibly even bigger curveball—the unexpected election of Donald Trump as 45th President of the United States.
Perhaps not a bombshell by the time it occurred, but nevertheless surprising in light of how long it took to play out, the Fed finally raised interest rates at the end of 2016, only the second time it hiked since 2006, after indicating at the end of 2015 that four hikes would probably occur in 2016.
It was an eventful year for markets from the outset. On January 4, the sharp selloff of the Shanghai Composite continued the meltdown that began in mid-2015. It was driven by fears of a slowdown of China’s economy and additional yuan devaluation. Though government intervention stanched the bloodletting, it’s been a roller coaster ride for Chinese markets throughout 2016.
February brought an additional shocker: crude oil prices hit their lowest level since May 2003—$26.21bbl. Mid month the Dow was down 10% on the year.
Both the commodity and the benchmark index have recovered nicely. Currently crude is priced at around $53.00, while the Dow, having already reached a number of all-time highs over the course of the year, now sits just a hair below its next record—the hallmark 20,000 level.
Gold, which many assumed would be a major beneficiary of such risk events as Brexit, as investors and traders went in search of safe havens immediately after election results were announced, hit its 2016 high during July, $1,364. Many predicted a new bull market for the Precious Metals complex, but the baby bull faltered and as of this writing appears to have died….at least for now. Gold is currently trading at around $1,130, its lowest level in 11 months.
There were some serious surprises in FX markets as well. The U.S. dollar looked to be weakening as 2016 commenced, with the US Dollar Index hitting its 2016 low of 92.62 on May 2. But as events during the second half of the year played out, king dollar reasserted its strength; the DXY is currently hovering around 103.00, a level not seen since December 2002.
The GBP and EUR didn’t fare nearly as well. The pound is currently trading at 1.2277 vs the USD, not far from a 31-year low of 1.2020 touched in the immediate aftermath of the Brexit vote. The euro is hovering at a 13-year low of $1.0456 though analysts predict there’s USD parity in its near future, possibly followed by a fall below that benchmark.
read more
Outlook 2017: What To Expect From Oil, Gold, USD And FX
Without question, 2016 was the year of the big surprise. Or to be more accurate, surprises.
The biggest surprises were the Brexit decision in late June, when—despite all expectations to the contrary—the UK electorate voted to leave the EU, sending markets into a tailspin for a few days while pushing sterling lower. Then, just when markets appeared to have regained their footing, the US electorate provided the next, possibly even bigger curveball—the unexpected election of Donald Trump as 45th President of the United States.
Perhaps not a bombshell by the time it occurred, but nevertheless surprising in light of how long it took to play out, the Fed finally raised interest rates at the end of 2016, only the second time it hiked since 2006, after indicating at the end of 2015 that four hikes would probably occur in 2016.
It was an eventful year for markets from the outset. On January 4, the sharp selloff of the Shanghai Composite continued the meltdown that began in mid-2015. It was driven by fears of a slowdown of China’s economy and additional yuan devaluation. Though government intervention stanched the bloodletting, it’s been a roller coaster ride for Chinese markets throughout 2016.
February brought an additional shocker: crude oil prices hit their lowest level since May 2003—$26.21bbl. Mid month the Dow was down 10% on the year.
Both the commodity and the benchmark index have recovered nicely. Currently crude is priced at around $53.00, while the Dow, having already reached a number of all-time highs over the course of the year, now sits just a hair below its next record—the hallmark 20,000 level.
Gold, which many assumed would be a major beneficiary of such risk events as Brexit, as investors and traders went in search of safe havens immediately after election results were announced, hit its 2016 high during July, $1,364. Many predicted a new bull market for the Precious Metals complex, but the baby bull faltered and as of this writing appears to have died….at least for now. Gold is currently trading at around $1,130, its lowest level in 11 months.
read more
PIMCO's 'baseline' views for 2017 on the Fed, GDP
A few headline points crossing via Bloomberg on PIMCO's 'baseline views' for next year
In brief:
Everything Goldman Sachs predicts for 2017 — in one chart
Mary Jo White to step down as SEC chief
Securities and Exchange Commission Chair Mary Jo White will step down as chair of the nation’s Wall Street overseer in January.
Securities and Exchange Commission Chair Mary Jo White will step down as chair of the nation’s Wall Street overseer in January, setting the stage for a potential conservative shift in the regulator’s leadership under the incoming Donald Trump administration.
White, a New York attorney and former federal prosecutor, made the announcement Monday, signaling a close to a nearly four-year tenure in which she championed aggressive enforcement and helped achieve approval of many post-financial crisis reforms required by the 2010 Dodd-Frank Wall Street Reform and Financial Protection Act. White took office in April 2013.