Market views for 2017 - page 5
You are missing trading opportunities:
- Free trading apps
- Over 8,000 signals for copying
- Economic news for exploring financial markets
Registration
Log in
You agree to website policy and terms of use
If you do not have an account, please register
PBOC to keep prudent, neutral monetary policy in 2017
China's central bank out with a statement. Bloomberg reporting. 31 Dec 2016
Essentially a repeat of the on-going mantra. No further detail at present.
US Economy Strengthens After Donald Trump Election
From consumer confidence to the labour market, the US economy has strengthened since the November 8 presidential election, feeding into expectations that Donald Trump’s first term in office will usher faster growth and opportunity.
While the gains in the economy cannot be attributed solely to Trump’s victory, election time has been a boon to everything from manufacturing to consumer sentiment. In its December manufacturing purchasing managers’ index (PMI), Markit said new orders for manufactured goods rose to their highest level in over a year as election uncertainty cleared.
The Reuters/University of Michigan consumer sentiment index also jumped to its highest level in 12 years. Survey chief economist Richard Curtin said 18% of consumers expect Trump’s policies to be favourable for the economy, twice as high as the prior peak in 1981 when Ronald Reagan won the White House.
Jobs and wages have also strengthened in the wake of the election results. US employers added a combined 360,000 workers to payrolls in the last two months, as workforce participation increased slightly and unemployment remained low. Average hourly earnings zipped to seven-year highs in December, rising 2.9% annually.
Rising wages are a sign of stronger inflationary pressures, which gives the Federal Reserve more scope to normalize monetary policy over the next 12 months.
read more
UBS saying China 2017 GDP about 6.4%
Remarks from Wang Tao, chief China economist at UBS, reported on Bloomberg
Top 6 Foreign Exchange Trades For 2017 From Credit Suisse
There is uncertainty regarding the new US President’s policy and its effect on the US dollar.
Hence, analysts at Credit Suisse have recommended “trades that do not make a direct play on the greenback and give investors some scope for risk diversification”.
“Our trades are pro-carry and also sell implied volatility, which are non-consensus approaches at a time of rising funding costs and perceived high political risk.”
Some of Credit Suisse’s top trade ideas are enumerated below.
1. Buy EUR/GBP Do Not Touch option with strikes at 0.8120 and 0.8870 for 15% of payout (spot ref. 0.8489) and a 6.7:1 trade-off.
Though there are risks associated with the triggering of Article 50 by the British Prime Minister Theresa May and the upcoming French elections, Credit Suisse believes that the risks will cancel itself.
“If USD risk remains the dominant force and European politics takes a back seat, it's possible that EURGBP implied volatility drifts naturally lower, allowing for profit taking opportunities,” said the analysts.
2. Buy Rouble against the vulnerable NAFTA currencies. While the Rouble is likely to benefit from better ties between the US and Russia, the NAFTA currencies will be under pressure on the perceived trade protectionist policies of the new President.
“Sell CAD/RUB 6m forward at 47.0850 (spot ref. 45.3940) with a 42.75 target a spot stop loss at 47.00,” Credit Suisse analysts recommend. Also,“sell a 6m MXNRUB forward at 2.8590 (spot ref. 2.8390), with a 2.60 target and a 3.00 spot stop loss.”
3. Credit Suisse doesn’t believe that the PboC will allow a one-time devaluation of the CNY, but they expect the CNY to fall against the basket of currencies, hence, they advise a long USD/CNH using 6m forward at 7.044 (spot ref. 6.8274), targeting a move to 7.40, with a forward stop loss at 6.80.
4. Buy USD/TWD 6m Non-Deliverable Forward at 31.790 (spot ref. 31.927) targeting a break higher to 33.5, with a stop at 31.25, as the TWD “is trading close to policy resistant levels that would potentially make it much more vulnerable to further CNY depreciation from here”.
5. The investment bank believes that the US dollar will rally significantly in 2017. Hence, they advise selling the EUR/USD for a target of 0.9625.
6. Analysts at Credit Suisse also recommend selling EUR/CAD for a target of 1.3520
source
Credit Suisse Top 6 Foreign Exchange Trades For 2017: Euro, Pound, US Dollar, Ruble, Canadian Dollar & Yuan
1 Buy Euro to Pound
Buy EUR/GBP Do Not Touch option with strikes at 0.8120 and 0.8870 for 15% of payout (spot ref. 0.8489) and a 6.7:1 trade-off.
Though there are risks associated with the triggering of Article 50 by the British Prime Minister Theresa May and the upcoming French elections, Credit Suisse believes that the risks will cancel itself.
“If USD risk remains the dominant force and European politics takes a back seat, it's possible that EURGBP implied volatility drifts naturally lower, allowing for profit taking opportunities,” said the analysts.
2. Buy Russian Rouble
Buy Rouble against the vulnerable NAFTA currencies. While the Rouble is likely to benefit from better ties between the US and Russia, the NAFTA currencies will be under pressure on the perceived trade protectionist policies of the new President.
“Sell CAD/RUB 6m forward at 47.0850 (spot ref. 45.3940) with a 42.75 target a spot stop loss at 47.00,” Credit Suisse analysts recommend. Also,“sell a 6m MXNRUB forward at 2.8590 (spot ref. 2.8390), with a 2.60 target and a 3.00 spot stop loss.”
3. Sell Chinese Yuan
Credit Suisse doesn’t believe that the PboC will allow a one-time devaluation of the CNY, but they expect the CNY to fall against the basket of currencies, hence, they advise a long USD/CNH using 6m forward at 7.044 (spot ref. 6.8274), targeting a move to 7.40, with a forward stop loss at 6.80.
4. Buy USD/TWD
Buy USD/TWD 6m Non-Deliverable Forward at 31.790 (spot ref. 31.927) targeting a break higher to 33.5, with a stop at 31.25, as the TWD “is trading close to policy resistant levels that would potentially make it much more vulnerable to further CNY depreciation from here”.
5. Sell the Euro to Dollar
The investment bank believes that the US dollar will rally significantly in 2017. Hence, they advise selling the EUR/USD for a target of 0.9625.
6. Sell the Euro to the Canadian Dollar
Analysts at Credit Suisse also recommend selling EUR/CAD for a target of 1.3520
source
EU Brexit chief sees special care for financial service ties
The European Union's Brexit negotiator Michel Barnier said on Saturday that the EU will demand "special vigilance" before letting British financial firms access the bloc because of the large risk London could pose to the EU's financial stability.
Responding to a report in the Guardian which said he had told EU lawmakers that he wanted a special deal to maintain EU firms' access to the City of London, Barnier tweeted: "When asked on equivalence I said: EU would need special vigilance on financial stability risk, not special deal to access the City."
An EU spokesman said the Guardian report did "not correctly reflect" Barnier's comments to a closed door meeting with members of the European Parliament last week.
EU officials said the point Barnier was making when asked about Brussels' willingness after Brexit to recognize British financial regulations as "equivalent" in rigor to those of the EU was that, as a lot of EU business was likely to still pass through the City, EU equivalence rules would have to be much more tightly drafted compared to those for smaller centers.
The Guardian quoted minutes prepared by parliamentary aides as saying Barnier told lawmakers: "Some very specific work has to be done in this area ... There will be a special/specific relationship. There will need to be work outside of the negotiation box ... in order to avoid financial instability."
EU officials said Barnier, a Frenchman who ran EU financial services policy, was not speaking of a "special deal" to limit the impact of Brexit on financial services trade between Britain and the EU but rather emphasizing that Brussels would have to take special care not to ignore stability risks in London.
EQUIVALENCE
The officials said he responded to a question on equivalence by noting that the extent of EU rules governing relations with non-EU financial centers was proportional to the volume of EU business conducted in them -- and so to the risk of, say, a bank collapse in London destabilizing markets on the continent.
With, say, the United States, the EU has negotiated accords to recognize the "equivalence" of, for example, bank supervision standards to make it easier for European companies to use U.S. banks and let U.S. institutions sell services in the EU.
The extent of such equivalence agreements has been a major concern for British-based banks wanting continued access to the EU market. Other EU governments have said they will welcome financial firms moving out of London and say Britain's economy and its big services sector must pay a price for Brexit so that it does not inspire voters in other countries to follow suit.
EU ministers and officials acknowledge that damage to London's global financial center caused by Brexit will hurt not only Britain but the other 27 EU states.
"Both the UK and the EU will suffer," Maltese Finance Minister Edward Scicluna said on Thursday as Malta took on the rotating chair of EU councils.
"We will lose that efficient center," he told reporters, forecasting that many financial firms would relocate to various cities in the EU. "That will be a loss ... The EU will suffer once services are fragmented. It will be longer term."
Nonetheless, Scicluna said, the signs of banks and other City firms preparing to move operations to other parts of the EU amid uncertainty about the terms of Brexit showed that the immediate cost was much greater for Britain.
3 G10 FX Trades For The Start Of 2017
G10: Short USD/JPY, short GBP/NZD, short EUR/NOK.*
FX markets this week have been dominated by Donald Trump’s press conference yesterday. The dollar rallied into the event, only to depreciate as Mr Trump failed to provide clarity on his policy aims (notably trade and fiscal policy). We entered short USD/JPY positions and continue to believe this trade has scope to perform.
As we argued last week, Mr Trump’s protectionist trade policy should be fundamentally negative for the dollar, and we see USD/JPY heading towards 110 if not lower in the coming months.
Our other trades in G10 space are short GBP/NZD and short EUR/NOK. On the GBP side, we think there is scope for further depreciation as the market comes to grips with the hard Brexit reality. We like to sell GBP vs NZD, which should benefit from an improved growth backdrop and terms of trade. We like to buy NOK, with policy rates, oil prices and capital flows all supportive of the currency. Meanwhile, the euro will likely be affected by the ups and downs of polls as the Dutch and French elections approach.
*We do not put a specific stop loss or target on these strategic trades, preferring to manage risk discretionally.
source
Fed's Yellen: Next rate hike depends on economy 'over the coming months'
Speaks in SF
Yellen Says U.S. Inflation “Much Closer” to Fed’s Target; Unwise to Let Economy Run Too “Hot”
The U.S. economy is approaching the Federal Reserve’s dual mandate of full employment and price stability, making it necessary to continue reining in monetary easing slowly, central bank Chair Janet Yellen said on Thursday.
“I think that allowing the economy to run markedly and persistently “hot” would be risky and unwise,” Yellen said in prepared remarks at the Stanford Institute for Economic Policy Research in San Francisco.
She added that waiting too long to raise interest rates could cause inflation expectations to rise uncontrollably, driving actual consumer prices higher. The combination of persistently low interest rates and a strong labor market could also lead to other financial imbalances that will be difficult to control.
The U.S. central bank last month raised its benchmark federal funds rate for only the second time in a decade. Rates are currently set between 0.5% and 0.75%. Policymakers expected accommodation to to be removed at a slightly quicker pace in 2017.
read more
Fed’s Harker Expects Three Rate Hikes In 2017
In comments on Friday, Philadelphia Fed President Harker reiterated that, GDP growth, inflation and the labour market are displaying considerable strength and indicate a robust economy.
Although the participation rate is lower than he would like, the jobs market is more or less at full health.
According to Harker, core inflation is on course to meet our target sometime this year or next and, if the economy continues to perform well, three modest rate hikes would be appropriate in 2017.
Harker also commented that rising inflation expectations make it more likely that inflation will reach the 2% target.
Although the speech contained added specific references to the New Jersey outlook, the bulk of the speech was identical to the one delivered last week.
In this context, there was very little market reaction with Harker’s comments also in line with current consensus expectations that there would be three rate increases during 2017. There will now be only limited comments ahead of the February 1st FOMC policy statement as Fed officials enter a silent period.
Market conditions overall were subdued with markets waiting for the comments from Trump following his inauguration with Treasury note futures edging away from overnight lows, but still down 2 ticks on the day.
source