Author Archive

Fundamental undervaluation supports the Swedish krona

At its 7 September meeting, Sweden’s Riksbank decided to keep the repo rate unchanged at -0.5% and to continue to purchase government bonds until the end of the year. The Riksbank acknowledged that the Swedish economy was relatively strong and that inflation was beginning to rise. However, the central bank made clear its concerns about […]

Environment is supportive of US dollar

With a December rate hike already largely priced in, further dollar support from Fed tightening could be fairly limited in the next few months, especially as the Fed is likely to lower its rate forecasts for the coming years to take into account increasing concerns about the decline in ‘neutral’ real rates. However, policies should […]

Sterling steadies after BoE easing, but other factors coming into focus

On 4 August, the BoE delivered a broad easing package that beat market expectations. Furthermore, the BoE hinted at an additional rate cut later in the year (our scenario is for another 15bp rate cut in Q4 2016). The easing package delivered by the BoE was a more aggressive response to Brexit than the market […]

Japan: No helicopter in sight

The Bank of Japan (BoJ) did not significantly change monetary policy at its Monetary Policy Meeting held on 28-29 July, contrary to market expectations. While the BOJ did announce an increase in its annual purchases of ETFs (from ¥3.3 trn to ¥6 trn), it kept the annual increase of the monetary base at ¥80 trn […]

Post-Brexit uncertainties favour certain currencies

Greater uncertainties, such as those caused by the Brexit vote, generally favour lower risk appetite. As a result, safe-haven currencies like the US dollar and currencies with positive current accounts and/or positive net international investment positions (JPY and CHF) are expected to outperform. Between the Bank of Japan and the Swiss National Bank, the latter […]

The dollar still has limited potential, while yuan could be source of volatility

The US dollar has been in a long-term upward cycle, at least since July 2011. But the dollar stuttered in April after the release of some poor economic data, and again at the beginning of June, when poor nonfarm payrolls data was released, leading some to believe that we are at the end of this […]

Silver in the spotlight

April 2016 was a good month for gold, with prices rising by +4.9% per ounce in US dollar terms. But it was a stellar month for silver, which rose by about 15.6%. Silver tends to be highly correlated to gold (the average 12-month rolling correlation since 1980 stands at 0.70), so it is not surprising […]

What prospects for gold prices?

Read full report here After the hefty gains made by gold this year, the attached Flash Note examines what might lie ahead for the precious metal by analysing the five key underlying drivers of gold prices: financial stress, inflation, real interest rates, the US dollar and supply and demand. Our conclusions are as follows: Presently, […]

Currencies: persistent market volatility should support funding currencies

Instead of looking at single currencies, it is sometimes interesting to look at broader themes to have a better understanding of how a certain group of currencies might behave. Among the best-known themes or strategies are carry trades, which are based on the principle of systematically buying high-interest-rate currencies and selling low-interest-rate currencies. Carry trade […]

The PBoC to focus more on the trade-weighted Chinese yuan

Since the beginning of November, the Chinese yuan (also known as the renminbi) has moved from roughly CNY6.32 per USD to CNY6.46 per USD, with an acceleration over the past few days. This depreciation means that the Chinese yuan has lost more than 2% against the US dollar, rekindling fears of a broad CNY devaluation […]

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