Central banks have used up most of their ammunition, while fiscal stimulus is met with a great deal of resistance. If the global economy falls short of expectations in the year ahead, all the stops will be pulled out to keep the economy going. Will the energy transition and the approach to climate change provide Europe with a sorely needed boost?
Will British voters deliver the desired UK election outcome to the markets and would this result continue to please the markets in the long term, resulting in a stronger pound and an outperformance of British shares versus European stocks?
Global economic prospects are improving somewhat, albeit from a low level and only because of very expansionary monetary and fiscal policies. The world economy starts to look like a ship adrift. In this publication, we will dive into what all this means for EUR/USD and whether the yen and Swiss franc can profit from these developments.
The increase in EUR/USD thus far has been disappointing given the decreasing interest rate differentials between the US and the Eurozone. Is the euro a weak currency or is the dollar a surprisingly resilient currency in the face of multiple rate cuts and quantitative easing by the Fed?
China and the US are close to a partial trade deal and Brexit is also close to more clarity. However, will optimism about a trade deal and Brexit be enough to push long term interest rates up and steepen the yield curves on a structural basis?
A Phase I trade deal between the US and China alone won’t stimulate growth much. However, growth could get a boost if a partial deal would be accompanied by large-scale fiscal stimulus. But this kind of stimulus will only come to pass during a crisis. Therefore, US and EMU short-term and long-term rates will remain in a downtrend for the time-being.