Dukascopy Bank is proud to present a second part of the article by Professor David W. Conklin from Western University, which discusses China's and India's needs and the commodity cycle, while the final part will provide an insight into how to prosper in the Global Financial Storm.
Dukascopy Bank is happy to present an article by Professor David W. Conklin from Western University, which will be published in two separate parts. The first part is devoted to the overview of world's economic and financial stance, two possible scenarios of developments for the Eurozone, and the fiscal cliff in the U.S. The second part of the article discusses
We have moved upwards towards the 1.3130 area, because the concerns regarding the fiscal cliff in the U.S.
There is an opinion that today's California is starting to look like austerity Europe. The jobless rate is at 10.2% level, the third highest in the country; immigration and health issues became a big concern. In addition, there is a state budget deficit, which reached a $16 billion level this May.
I believe that, compared to the situation six months ago, the risk of Greece leaving the Eurozone has somewhat receded.
The United States is highly likely to overtake Saudi Arabia as the largest oil producer between 2017 and 2020, if it has the adequate policy and infrastructure. The U.S. should also become a net natural gas exporter in 2020 given the right policy. The U.S. is highly likely to become self-sufficient in energy by 2035.
Since the beginning of 2012 China's U.S. Treasury holdings have decreased from $1.5 trillion to $1.15 trillion, while Japan increased its share by 24% and reached the level of $1.12 trillion in the U.S. treasuries. Japan is expected to become the United States' largest foreign creditor by January of the next year.
I think the Euro will remain in a range given that the news of the meeting should have been factored in.
I would not describe gold's behavior as a safe haven. I would say it is currently looking more like a risk asset than a safety trade.
I think the reasons for the slowdown are not coming from domestic sources, but rather due to negative developments in the international economy, and especially the uncertainty about what is happening currently in Europe.
We expect EUR/SEK to trade at 8.75 at the end of the year, while our forecast for USD/SEK is 6.85. The major drivers for the Swedish Krona are obviously Swedish macro environment and the ongoing Euro crisis.
Our main expectation is that the Greek parliament will vote "Yes" to the austerity package this evening. With that package passed, the Eurogroup meeting on Monday will be able to set out the longer term plans for Greece and release the next tranche funds.
Since yesterday morning, especially if we look at EUR/USD, we can see a very narrow sideways trading range. To my mind, it looks like everybody expects Barack Obama to remain president; thus that has been priced in. Currently it seems that the elections are not putting too much uncertainty into the market.
Market participants have been expecting that the Fed would determine an additional QE (Quantitative Easing) in December, hence USD/JPY would trade below 78.00.
I would say that USD/JPY has been in a pretty rangy trading for quite a while, while EUR/JPY is more or less driven by the move from the Euro side.
In recent weeks the Australian Dollar has been fairly resilient against both currencies.
I would describe the current economic situation of the US as that of limping along.
I think the market is long on the currency pair due to a couple of reasons. The main issue is obviously the weakness of the greenback, given QE3 and the fact that the ECB has officially decided to launch the OMT programme, which will help Spanish and Italian bonds.
The political game played in European Union at the moment is a "give and take" game.
I think these better-than-expected U.S. numbers will lead to the higher U.S. yields and eventually to higher USD/JPY rates.
Arne Lohmann Rasmussen, Head of FX Strategy at Danske Bank, and Georgette Boele, Head of FX & Commodity Strategy at ABN Amro Bank, on EUR/USD
South Africa's Rand is a commodity currency, thus the global growth outlook and commodity cycle will typically be principle cyclical drivers of the currency.
The Dollar has been weak since the end of August, when the Fed Chairman Ben S. Bernanke made it clear that further quantitative easing was in the pipeline, and there were increased incentives for US investors to move money overseas.
That is surely a contentious issue right now, the Dutch disease debate. Mark Carney, the governor of the Bank of Canada, about two-three weeks ago, made a speech specifically addressing that issue.