Investment Themes

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Investment Theme – Euro correction deepens as political risks resurface

Posted on October 4, 2017 at 4:03 pm GMT

The euro has stumbled upon some unexpected headwinds during the past month, taking some of the heat off the currency’s incredible rally this year. Soon after peaking at a 32-month high of $1.2092 on September 8, the euro entered a corrective phase, triggered by a more cautious-than-anticipated European Central Bank at its policy meeting on September 7. Expectations that the ECB would begin the process of winding down its massive stimulus program, receding political uncertainty after the French elections, as [..]

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Investment Theme – Investors remain negative on sterling despite hitting 1-year high against the dollar

Posted on September 13, 2017 at 2:56 pm GMT

Expectations that the Bank of England will take a more hawkish stance at its policy meeting this week have lifted sterling from two-month lows ploughed at the end of August, offsetting concerns about a slowing economy and a lack of progress in the Brexit negotiations. Stronger-than-expected inflation data on Tuesday fuelled those expectations as UK consumer prices rose by an annual rate of 2.9% in August, just shy of the BoE’s upper limit of 3%, at which point the Governor [..]

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Investment Theme – New Zealand dollar rally under threat from rising political risks

Posted on September 6, 2017 at 2:33 pm GMT

The New Zealand dollar had surged by around 10% between May’s 2017 low point and July’s two-year high, making it one of the better performing currencies of the year against the US dollar. However, central bank unease about the strength of the currency, downgrades to the government’s growth forecasts and an unexpectedly tight election race have derailed the rally. Even as the New Zealand economy enjoys strong growth and a huge government surplus, the kiwi has stumbled upon some unexpected [..]

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Investment Theme – As dollar reaches bottom of range again, investors await direction from Fed and White House

Posted on August 24, 2017 at 12:41 pm GMT

Despite a series of significant uptrends and downtrends since March, the US dollar has largely been bound within a trading range of between 115 and 108 against the Japanese yen for much of the year. Growing doubts about the Fed’s ambitious projections of one more rate increases in 2017 and three hikes in 2018 have weighed on the yield of 10-year Treasury notes, which peaked at 2.629% in March and currently stand around 2.185%. However, another factor in putting an [..]

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Investment Theme – German, Italian exports most exposed to strengthening euro, Netherlands cushioned

Posted on August 17, 2017 at 9:34 am GMT

In times of a strengthening euro, the region’s exporters could be hurt as sales generated outside of the eurozone may translate poorly back into earnings reports denoted in euros. The biggest export countries with the least exposure to the single currency zone could be dented the most. Germany and Italy are some of the world’s largest exporters, yet they have the smallest amount of exports delivered within the eurozone. By contrast, the Netherlands outperforms them with more than 50% of revenues generated [..]

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Investment Theme – Mixed UK data and Brexit uncertainty cloud outlook for sterling

Posted on August 16, 2017 at 3:08 pm GMT

After being criticised by EU officials for turning up at the negotiating table unprepared, the UK has this week published its most comprehensive vision yet of a post-Brexit relationship with the bloc. The British government published yesterday its first policy paper on a future customs agreement with the European Union, and is due to soon release a paper on Northern Ireland and its border arrangements with the Irish Republic. The paper calls for a new customs partnership with the EU [..]

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Investment Theme – Has Swissie bid goodbye to its highs for good?

Posted on August 2, 2017 at 12:59 pm GMT

After two years of relative stability, the safe-haven swiss franc came into the spotlight again when it came under pressure against the euro last week and broke out of its long-term range. The much-desired weakness will likely be welcome by the Swiss National Bank which longs for a more export-competitive currency. However, the swissie remains “overvalued” as the level of risk aversion in the markets remains quite high despite investors’ rising appetite for riskier assets.  The question arising now is [..]

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Investment Theme – Weakening dollar helps US exporters; lack of Trump reforms disappoints domestic-orientated firms

Posted on August 2, 2017 at 9:33 am GMT

US companies with large revenue exposure to exports could get a significant boost to their top-line amid the weakening dollar. At the same time, investors could start losing interest in companies that have a limited international footprint and are mostly focused on the US market as Trump-promised business reforms and fiscal stimulus get delayed. The percentage of S&P 500 companies’ sales from foreign countries was 43% in 2016, with the energy and technology services sectors topping the list. The US dollar fell following last week’s [..]

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Investment Theme – Dovish Fed spurs commodity prices and currencies higher

Posted on July 27, 2017 at 4:06 pm GMT

Commodity currencies are looking at their most bullish since 2015 after the Federal Reserve struck a dovish tone on inflation at its latest monetary policy meeting yesterday, lifting the price of risk assets, including those of commodities. Commodity prices have already been on the up during the past month, boosted in part by growing demand from China – the world’s biggest consumer of commodities. This uptrend has helped drive commodity-linked currencies such as the Canadian, Australian and New Zealand dollars [..]

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Investment Theme – What now for the dollar as tax cut hopes fade after health bill collapses?

Posted on July 19, 2017 at 3:55 pm GMT

The slide in the US dollar intensified this week after the Republicans’ attempt to push through their healthcare reform plan in the Senate failed for a second time. The defeat came after two more Republican Senators opposed the legislation on Monday, adding to the two Senators who had already said they would not vote in favour of the latest version of the bill. Given the Republicans’ slim majority of 52-48 in the Senate, the party cannot afford to lose more [..]

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