Trading view from Brent Donnelly, spot FX trader at HSBC, the author of a well-known daily FX commentary called AM/FX,
The increasing use of ETFs in EM has prompted a debate around potential bearish cascade-type liquidation once volatility returns to this asset class. We investigate this thesis and conclude that the concerns about EM ETFs are overblown.
A research note from BNP Paribas about ECB QE reduction and its FX impact. Bottom line: whichever way you look at it, it is difficult to avoid the conclusion that reduced ECB QE will – all other things being equal – be a force for a stronger euro. Other things are not equal, however…
The Conservatives have hung onto power, albeit only just. Uncertainty abounds: this could complicate Brexit negotiations and the domestic policy agenda will be constrained. We retain our GBP-USD forecast of 1.20 for year-end. The election may be over but the politics has just begun.
We expect the global economy to pick up and for risk to remain supported over the coming year. Combined with a still high degree of monetary accommodation from DM central banks, we expect USD to weaken moderately and EM FX to stay supported.
ING Economic and Financial Analysis – Our answers to this month’s big questions.
Nomura: in our view, the prevailing macroeconomic backdrop at the time is the main consideration, not supposed seasonality, which has been behind the run of falls in AUD in May. We look for AUD/USD to consolidate, but for AUD to underperform other key crosses, such as EUR/AUD.
Core scenario: Global reflation to get a boost from a recovery in consumption and investment as political risks ease in Europe. Trump’s tax cut plan is likely positive for ‘reflation’. Asia and Emerging Markets are benefitting from a rebound in global trade.
The world has pulled out of recession and deflation zone, and is now likely growing at a steady pace, just below 3 %,but only 0.2 % above potential, with balanced risk. Global macro vol has fallen to a new record low.
BNP Paribas CLEER Forecasting Model. Definition of fair value: the exchange rate that corresponds with the current economic fundamentals. Duration of deviation: 6-18 months. Uses model based projections for exchange rates, scenario analysis based on economic variables.