No New Year Resolutions
Back in October we identified two possible scenarios for the global economy as we entered the new year. In the first scenario, markets might already be looking through the current recession, severe though it is, in the hope of some improvement in trading conditions as the unprecedented array of financial support measures began to gain traction. In the second scenario, investors would be battening down the hatches in anticipation of a multi-year downturn never before experienced in the post-war period. So far this year markets have flirted with both of these potential outcomes, seemingly unable to decide one way or the other, thus underpinning currency volatility at recent extraordinary high levels.
Against this background, we maintain our cautious approach to position taking, looking for a range-trading environment in EUR/USD and seeking selective opportunities among cheap “carry” currencies. With the US economy the first into the downturn, there is a strong possibility that it will be among the first to show signs of recovery this year. Demand in the Euro area may lag for a time in this scenario given the relatively cautious response by domestic monetary and fiscal policy makers and the more export-oriented make up of its economy. On the other hand, the higher structural savings rate in many Eurozone economies may provide a stronger cushion against a more protracted downturn in financial asset markets, should one develop. For the time being, we look to fade both ends of the prevailing 1.25-1.45 EUR/USD trading range.
Elsewhere, we continue to hold selective exposure to a range of relatively high yielding currencies that have become significantly “cheap” during the recent sell-off; notably the Australian dollar and the Norwegian krone. Sterling
Disclaimer
Statements and opinions expressed in the following articles, reviews and other materials herein are those of the authors; the editors and publishers.
While every care has been taken in the compilation of this information and every attempt made to present up-to-date and accurate information, we cannot guarantee that inaccuracies will not occur. Source IFA Limited will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.
Statements and opinions expressed in the following articles, reviews and other materials herein are those of the authors; the editors and publishers.
While every care has been taken in the compilation of this information and every attempt made to present up-to-date and accurate information, we cannot guarantee that inaccuracies will not occur. Source IFA Limited will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.
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