Investment Themes

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Investment Theme – Relief rally in euro following round one of the French election; further risks lie ahead

Posted on April 25, 2017 at 3:05 pm GMT

The euro was given a boost after the outcome of the first round of French elections last Sunday but the single currency’s outlook does not only depend on the May 7 result. Aside from politics, economic data are also important and so are the European Central Bank’s policies. The risk sentiment outlook improved drastically following the first round of the elections in France last Sunday. There was a relief rally in the euro and in global equity markets and capital [..]

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Investment Theme – Geopolitical risks and hawkish Fed lift dollar but outlook determined by US fiscal policy

Posted on April 10, 2017 at 3:24 pm GMT

The US dollar staged a late rebound last week after coming close to breaking below its recent support level of 110 yen. Investor nerves ahead of the summit between the US and Chinese presidents as well, as the risk-off generated by the US airstrikes on Syria, had driven the dollar to a 1½-week low of 110.12 yen on Thursday. Unexpectedly strong signals from the Fed that it will likely start the process of normalizing its balance before the end of [..]

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Investment Theme – Weaker yen boosts Japanese business confidence but US policy uncertainty clouds outlook

Posted on April 3, 2017 at 2:35 pm GMT

Business sentiment in Japan rose to a three-year high during the first quarter according to the Bank of Japan’s latest quarterly Tankan survey. A weaker yen, along with strengthening global demand, was a big factor for the optimism as the Tankan all firms index rose from 7 to 10 in the first three months of 2017 – the highest since the corresponding period in 2014. Japanese policymakers have been struggling to boost the country’s flagging growth rate and lift consumer [..]

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Investment Theme – Commodity currencies struggle on faltering Trumpflation trade

Posted on March 29, 2017 at 9:59 am GMT

The pullback in the US dollar over the past two weeks has brought little relief to commodity-linked currencies, as their resilience against the resurgent greenback had been underpinned by the Trumpflation trade, which came close to being fully unwound this week. Currencies such as the Australian, New Zealand and Canadian dollars have come under pressure in the past week on fears that the reflation trade inspired by Trump has come to an end. Market expectations that Donald Trump’s presidency would [..]

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Investment Theme – Dollar overbought but could rise again

Posted on March 22, 2017 at 4:43 pm GMT

Donald Trump’s election victory last November has had a profound effect on US equity markets, the dollar, US interest rates and inflation expectations. Trump’s presidential win and his pledge on tax cuts, deregulation and infrastructure spending last November spurred bullish bets on the dollar. The dollar index rose 5.6% from the election through to the end of 2016 to reach a 14-year high, while the S&P 500 benchmark equity index rallied to a record high, as fundamentals both in the [..]

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Investment Theme – As euro breaks above $1.08, is dollar parity out of the picture?

Posted on March 22, 2017 at 4:38 pm GMT

The euro has appreciated by about 4% from its January lows when it touched a 14-year trough of 1.0340 against the US dollar at the height of the dollar rally. The receding threat of a major advance by populist parties across Europe’s political landscape has propped up the single currency in recent weeks, confounding some predictions made late last year that the euro would hit parity with the dollar as early as in the first quarter of 2017. While uncertainty [..]

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Investment Theme – Canadian dollar vulnerable to oil prices and US policies

Posted on March 16, 2017 at 3:59 pm GMT

The Canadian dollar has been range-bound due to various factors pulling it in different directions. The main risks to the loonie are oil prices and US President Donald Trump’s policies. Meanwhile the diverging monetary policies of the Bank of Canada and the Federal Reserve have weighed on the loonie. Some believe that the outlook for the Canadian dollar is dim mainly due to the widening gap in interest rates in the US and Canada as the Fed embarks on a [..]

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Investment Theme – Pound takes a knock from Brexit bill and Scottish referendum call

Posted on March 14, 2017 at 2:37 pm GMT

The British pound became susceptible to Brexit-induced volatility today as investors were unnerved by Scotland’s fresh call for an independence referendum coinciding with Parliament’s approval of the Article 50 bill. The Scottish National Party’s decision to call a second referendum on Scottish independence from the UK on the same day as the Article 50 bill passed through Parliament, was seen as a deliberate move by the SNP to derail the government’s Brexit plans. Prior to the SNP’s surprise but not [..]

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Investment Theme – After Yellen, markets in search for next dollar driver

Posted on March 6, 2017 at 3:03 pm GMT

With a March rate hike now mostly priced in by financial markets, the US dollar appears to be suffering a case of “buy the rumour, sell the fact” as the rally struggles to regain momentum. Last week, a chorus of Fed speakers, including Fed Chair Janet Yellen herself, all but confirmed a rate rise as early as the next FOMC meeting on March 14-15, pushing up the odds (as implied by Fed fund futures prices) to over 80%. However, apart [..]

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Investment Theme – Weaker yen having positive impact on inflation in Japan

Posted on March 3, 2017 at 4:45 pm GMT

Consumer prices in Japan are showing signs of picking up as a result of a weakening yen combined with the strength of the US dollar since Donald Trump’s US election victory, giving relief for the Bank of Japan in its fight against deflation. Core inflation has returned to Japan for the first time since 2015 according to data released today. Consumer prices excluding fresh food, rose 0.1% year-on-year in January after a 0.2% drop in December. Japan’s policymakers have been [..]

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