central banks – Basket Village USA http://basketvillageusa.com/ Mon, 18 Apr 2022 17:53:05 +0000 en-US hourly 1 https://wordpress.org/?v=5.9.3 https://basketvillageusa.com/wp-content/uploads/2021/03/basketvillageusa-icon-70x70.png central banks – Basket Village USA http://basketvillageusa.com/ 32 32 Stocks and yields end higher after Fed interest rate hike https://basketvillageusa.com/stocks-and-yields-end-higher-after-fed-interest-rate-hike/ Wed, 16 Mar 2022 06:47:03 +0000 https://basketvillageusa.com/stocks-and-yields-end-higher-after-fed-interest-rate-hike/

TOKYO – Stocks reversed in the afternoon and closed broadly higher on Wednesday after the Federal Reserve announced its first interest rate hike since 2018.

As Wall Street had widely anticipated, the central bank announced that it was increasing its short-term policy rate by 0.25 percentage point. The Fed, which has kept its rate near zero since the pandemic recession hit two years ago, has also signaled potentially up to seven rate hikes this year.

The move marks a shift in policy by the Fed away from keeping interest rates ultra-low as it seeks to rein in inflation, which is at its highest level since the early 1980s. Rate hikes eventually lead to higher loan rates for many consumers and businesses.

Stocks lost most of their early gains and bond yields rose sharply shortly after the Fed’s latest policy statement was released at 2 p.m. ET. The indices faltered as Fed Chairman Jerome Powell made remarks at a press conference before surging in the final hour of trading.

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The S&P 500 rose 2.2%, the Dow Jones Industrial Average gained 1.5% and the Nasdaq composite climbed 3.8%, its biggest gain since November 2020.

Bond yields rose sharply after the Fed announcement. The 10-year Treasury yield rose to 2.20%, then hovered at 2.17% by late afternoon. It was at 2.15% on Tuesday evening. The 2-year Treasury yield rose to 2% then fell back to 1.94%, still a big move from 1.85% a day earlier.

“The market got what it expected,” said Randy Frederick, vice president of trading and derivatives at Charles Schwab. “Interest rates need to be higher. Inflation has to be kept under control, and the risk to everything is much greater with high inflation than with high interest rates.

The Fed is trying to slow the economy enough to stem the high inflation that is sweeping the country, but not enough to trigger a recession. It’s part of a wider move by central banks around the world to end the support they provided to the global economy after the pandemic hit.

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Inflation has hit its highest level in generations as the global economy recovers. Economists worry that this could eventually reduce spending and hurt growth. The Commerce Department’s latest retail sales report shows Americans slowed February spending on gadgets, home furnishings and other discretionary items as higher prices for food, gasoline and housing consume more of their wallet.

In remarks after the release of the central bank statement, Powell noted that before the Russian invasion of Ukraine, he expected inflation to stabilize in the first three months of this year. . He now believes that inflation will decline in the second half.

“We are now seeing short-term upward inflation in oil prices, other commodity prices,” he said. Chains.”

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The S&P 500 rose 95.41 points to 4,357.86. The Dow added 518.76 points to 34,063.10. The Nasdaq gained 487.93 points to 13,436.55.

Smaller company stocks also posted solid gains. The Russell 2000 Index rose 61.75 points, or 3.1%, to 2,030.72.

A list of concerns, including inflation, has made markets volatile in recent weeks. Stocks have been swinging wildly on a daily, sometimes hourly basis. This volatility will likely persist until investors have a better idea of ​​where the economy is headed.

“It’s not uncommon for hiking cycles to spook stocks,” said Gargi Chaudhuri, head of iShares Investment Strategy Americas. “But as the way forward becomes clearer, most sectors of the S&P 500 index post positive returns in the year following the first rise.”

Even so, the combination of higher rates and inflation poses a risk to the economy, noted Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.

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“The stock market is vulnerable to the twin threats of too high inflation, which will dampen corporate profits and consumer demand, and too high interest rates, which could trigger a recession,” he said. declared.

Oil prices have mostly risen since late February amid fears that the conflict in Ukraine will squeeze energy markets. Benchmark US crude fell 1.5%, a relatively muted move considering the gigantic swings it has been making recently. Prices are up nearly 30% for the year, and the recent surge has pushed U.S. gasoline prices to record highs. This heightened concerns about worsening inflation.

Tech stocks, banks, retailers and other companies that depend on consumer spending accounted for much of the S&P 500’s gains as investors shifted money to sectors seen as riskier. Microsoft rose 2.9%, JPMorgan Chase gained 4.5% and Amazon.com gained 3.9%. Energy companies and traditionally safe stocks such as utilities lagged the broader market.

Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.

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Bitcoin vs. Gold: what is the best hedge against inflation? https://basketvillageusa.com/bitcoin-vs-gold-what-is-the-best-hedge-against-inflation/ Wed, 16 Mar 2022 04:20:36 +0000 https://basketvillageusa.com/bitcoin-vs-gold-what-is-the-best-hedge-against-inflation/

As inflation rages and hits 40-year highs, investors are looking for anything to mitigate its effects on their portfolios. At times like these, investors often turn to commodities, especially gold, which has a long history as a hedge against inflation. More recently, some traders have touted Bitcoin and other cryptocurrencies as alternative ways to hedge inflation. Is one better than another?

Here’s the bottom line: Gold beats Bitcoin as an inflation hedge for a variety of reasons. In fact, many experts do not consider Bitcoin or other cryptocurrencies as an inflation hedge, at least not yet.

What is an inflation hedge?

A hedge is a kind of investment that offsets something else, but the logic behind a hedge investment can differ depending on what exactly the investor intends to do.

“A hedge can be a correlated but contra position in the movement of an asset price or an uncorrelated entity that provides stability in times of volatility,” says Emily Man, investor at venture capital firm Redpoint Ventures. in the San Francisco Bay Area.

For the first, she says airlines buy oil futures as a way to hedge their future earnings. For the latter definition, Man points to hedge funds that might buy Visa stock but short their competitor Mastercard as a way to isolate specific risks and opportunities that impact the two companies.

Thus, an inflation hedge is an investment that offsets all or part of the effects of inflation. Perhaps hedging increases as inflation rises (offsetting the decline in stocks, for example). Or perhaps the hedge is simply largely inflation-proof as a factor, providing stability to a portfolio.

Does Bitcoin or Gold Better Protect Against Inflation?

When comparing Bitcoin and gold as inflation hedges, experts point to a number of dimensions on which to compare them: their track record, efficiency, ease of access, and other sources of demand for inflation. asset itself.

History as a Hedge Against Inflation – How Bitcoin and Gold Compare

On the question of their history as inflation hedges, there is no doubt that gold has a solid track record, while Bitcoin is barely over a decade old to back itself up.

“Gold has thousands of years of established history as a resolute store of value,” says Fergus Hodgson, Director of Econ Americas, Roving Editor of Gold Newsletter. “Over a long period, this is the safest inflation hedge you can get.”

In contrast, cryptocurrency is a relative newcomer to global asset markets.

“Bitcoin, however, has a 12-year track record so far and is still fully defining its characteristics as a hedge in this modern economy,” says Chris Kline, COO and co-founder of Bitcoin IRA, a company that allows investors individuals to buy cryptocurrencies in a self-directed IRA.

However, Hodgson doubts the long-term viability of the cryptocurrency.

“Its future as a store of value is precarious,” he says. “In my assessment, central bank digital currencies and altcoins will challenge the value proposition of Bitcoin as a medium of exchange.”

The recent move by the Biden administration to regulate cryptocurrency also includes the potential for the creation of a US central bank digital currency.

Effectiveness as an Inflation Hedge – How Bitcoin and Gold Compare

The lack of longevity raises serious questions about Bitcoin’s ability to be an effective inflation hedge. Meanwhile, gold has long demonstrated its ability to act as a hedge, according to many experts.

“There really is no historical data on Bitcoin as an inflation hedge,” says Adam Perlaky, Principal Analyst, World Gold Council. “There has actually been no period of high inflation during Bitcoin’s existence. There is no data to back it up.

Perlaky points out, however, that the lack of data does not mean that Bitcoin could not become an inflation hedge, rather that there is no demonstration of this potential so far.

In contrast, he says that “there is evidence that gold is a hedge against inflation and that is one of the reasons why investors buy gold” and that gold has performed well in periods of high inflation.

In support of Bitcoin, Kline of Bitcion IRA points to the cryptocurrency’s potential to act as a defense against central bank money printing.

“Bitcoin has a finite supply,” he says. “The government has been printing unprecedented amounts of money since 2008, and it’s starting to have an impact on the wider economy. This manipulation cannot be manufactured in the same way since Bitcoin is limited to only 21 million coins, providing an alternative to the fiat money system.

“Now that real estate prices are off the charts and gold is inaccessible to the average American, crypto has become part of that inflationary hedging mix,” Kline says.

But Robert R. Johnson, professor of finance at Creighton University, further emphasizes Bitcoin’s inability to be an inflation hedge.

“You can’t invest in the wide range of cryptocurrencies, you can only speculate,” says Johnson. “There is no rational way to determine the value of Bitcoin or any of the other cryptocurrencies, as one cannot apply the tools of traditional finance to arrive at the intrinsic value (or real value) of assumed asset.”

Ease of Access – How Bitcoin and Gold Compare

Bitcoin and gold are relatively easy to buy and clear, especially since there are ready markets for both. But gold has the edge due to more established ways of trading it.

Gold might be relatively easier to invest in, given the wide range of ways to do so, including buying actual physical gold, buying ETFs that own physical gold, or gold companies , as well as futures contracts. Investors have many ways to get interested in gold, depending on their intention. Many of these ways involve exchange-traded products such as stocks and ETFs, giving investors easy and cost-effective access to their investment.

For those looking to buy physical gold, however, Bitcoin IRA’s Kline warns of the “storage logistics, shipping, and security requirements” that come with this type of gold investment.

Traders can buy Bitcoin through crypto exchanges and now through traditional brokers, if they don’t mind the broker having custody of the cryptocurrency. Those who insist on taking custody of their coins will want to go through an exchange or intermediary that allows this.

Although access to bitcoin is a bit more complex than gold, bitcoin proponents have been pushing to find equally easy ways to buy bitcoin through mediums of exchange such as ETFs. For now, traders can buy Bitcoin futures ETFs, which provide similar exposure to the digital currency.

In terms of costs, Bitcoin can sometimes be cheaper. Traders can pay one-time commissions for owning Bitcoin. In contrast, those who buy gold ETFs may pay no commission, but pay an ongoing expense ratio that is a percentage of the total investment. So if this type of gold investment is held long enough, it could cost more than the Bitcoin commission, depending on the exact cost of this commission. However, frequent trading can drive up commissions quickly.

Other Sources of Bitcoin and Gold Demand

Those looking to use Bitcoin or gold as an inflation hedge should also understand other sources of demand that can support the prices of these assets.

Gold has many use cases including industrial and electronics applications, jewelry, medical applications, and of course it is often purchased by central banks as a store of value.

“Understanding trends in addition to investing is important because the multifaceted nature of demand is a unique attribute of gold and a key reason why it is an effective strategic part of portfolios,” says Perlaky of the World Gold Council.

In contrast, Bitcoin’s usefulness relies entirely on its ability to be exchanged for other things, including traditional currency. So if bitcoin can’t be used to buy things or if people can’t trade it with others who value bitcoin in this way, it’s effectively worthless.

“Bitcoin is a purely speculative asset with limited capacity as a medium of exchange,” says Johnson of Creighton University.

“Bitcoin has enjoyed first-mover advantage among cryptocurrencies, but its use case is weak,” says Hodgson of Econ Americas. “Its intrinsic value was supposed to be its convenience as a medium of exchange, but even proponents are now hesitant to affirm this and try to label it digital gold.”

At the end of the line

While gold may be a better inflation hedge than Bitcoin, could traders at least use Bitcoin as a hedge against a volatile stock market? Even that seems dubious.

“We have historical evidence of how cryptos have performed during systemic market selloffs,” Perlaky says. Crypto behaves more like a risky asset, more like tech stocks or momentum stocks.

This kind of correlation makes Bitcoin a poor hedge for stocks, at least so far.

Learn more:

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Sri Lanka’s central bank surprised by runaway inflation https://basketvillageusa.com/sri-lankas-central-bank-surprised-by-runaway-inflation/ Mon, 07 Mar 2022 06:11:15 +0000 https://basketvillageusa.com/sri-lankas-central-bank-surprised-by-runaway-inflation/

ECONOMYNEXT – Sri Lanka’s central bank has been taken by surprise by the sharp rise in inflation, Governor Nivard Cabraal said after inflation hit 15.1% in February 2022, after two years of printing record currency to keep interest rates low.

The central bank also accused banks of failing to raise deposits after pumping hundreds of billions of new rupee reserves into banks despite applying an indexed regime, to keep policy rates artificially low as budget deficits were increasing.

Sri Lanka’s 12-month inflation rose from 5.7% in September 2021 to 15.1% in February 2022 after two years of unrelenting money printing, 40% growth in broad money and growth 40% reserve currency despite two years of balance of payments deficits under a peg.

Sharp rise

“We were surprised by the sharp rise in inflation,” Governor Cabraal told reporters after raising interest rates by 100 basis points to 7.50%.

“We think we also need to give signals to the country and the economy that we want to fight inflation.”

However, by then the central bank had generated 15.1% in February, a 13-year high, just behind the State Bank of Pakistan’s 12.1% for the same months.

Related

Inflation in Sri Lanka hits 15.1% in February 2022, a 13-year high

“It (inflation) has increased beyond our normal norms,” ​​Cabraal said. “Thirteen years of single-digit inflation have been broken. And we are worried about it, because it is our responsibility to ensure price stability which has been partially undermined.

Sri Lanka has followed the Federal Reserve in printing money for the past two years, ignoring warnings and pointing to modern monetary theory. Overt price controls were imposed to seal bond auctions in order to cripple them.

In past currency crises, auctions have been closed by rejecting market bids and printing money by writing them to the central bank’s balance sheet to stimulate imports and blow up the currency.

Governor Cabraal removed price controls, allowing market rates to rise, but policy rate hikes were slow, effectively providing rupee reserves to the banking system at low cost.

Sri Lanka and Pakistan have the worst central banks in South Asia. The Pakistan Rupee depreciated 4.70 against the US Dollar (both are derived or pegged heavily 1 to 1 against the Indian Rupee), 179 against the US Dollar by Feb 2022.

The Sri Lankan rupee has been depreciated by the central bank from 4.70 to the dollar to 203 since its inception with dual peg disputes, and parallel exchange rates are around 249 rupees now with the latest money printing.

The currency crashes as the central bank attempts to maintain a peg (external peg) and also prints money to maintain a key rate in the mistaken belief that it can target inflation (a domestic peg) without a rate floating exchange rate.

Over the past two years, 1.7 trillion rupees have been printed to keep interest rates artificially low, putting pressure on the exchange rate and causing balance of payments deficits.

Some of the printed money is for direct appropriation of foreign exchange reserves to pay off debt, as the cash injections have created currency shortages and the central bank has not been able to recover them as per the past because of too low rates.

Supply side

The central bank continued to blame “supply” and “imports as monetary aggregates soared.”

“We observe that supply is one of the main contributory factors to these price pressures,” economic research director Anil Perera said, repeating claims made in the past by Sri Lanka’s central bank and also the Federal Reserve after generating high inflation.

Federal Reserve chief Jerome Powell also engaged in similar propaganda claiming inflation was “passing” and was due to supply chain constraints. In Sri Lanka, it is strongly believed that an indeterminate part of inflation is non-monetary or cost-induced.

Sri Lanka’s exports and imports (traded goods) however react to Federal Reserve money printing through the pegged exchange rate and items such as tea, rice or oil prices may increase.

Powell made history last year by claiming there was no connection between money supply and inflation.

Related

US inflation will exceed target, Powell raves (Hanke)

US inflation climbs to 7.5% as Sri Lanka hits 14.2%

US inflation expected to stay high in 2022, 2023 even if Fed tightens now: Steve Hanke

Sri Lanka’s broad money measured by M2b grew by 40% from 7.6 trillion to 10.6 trillion in the two years ending December 2021.

The food price index increased by 42% over the period.

Sri Lanka’s reserve currency rose by 40% from December 2019 to December 2022 as the central bank continued to inject money to maintain its key rate after selling reserves for imports.

The central bank sold more than $900 million in reserves for imports from October but the reserve currency did not contract.

However, after selling dollar reserves and pumping rupee reserves back into the banking system (to sterilize interventions) allowing banks to engage in unchecked lending without lifting a finger to raise deposits, the central bank blames now commercial banks.

“We observe that deposit rate adjustments still remain slow,” Perera said. “And that’s been the cause of low deposit growth in the banking system and that’s causing excess circulation of currency to stay in the system.”

Sri Lanka’s reserve currency (currency in circulation plus statutory reserves) fell from 1,296 billion rupees in September to 1,339 billion rupees in February 2022, despite over $900 million in foreign exchange reserve sales over the course of of the period.

About 662 billion rupees of reserve are injected into the banking system overnight. Its cost to banks jumped 1% overnight as the policy rate was raised.

In an extraordinary move, the central bank in September 2021 raised its legal reserve ratio to levels it had before the start of MMT-style monetary policy and reprinted the full amount through takeover operations. term pension.

Related

Sri Lanka prints Rs 106.7 billion to completely sterilize interventions, effect of RRS hike

The 12-month inflation in Sri Lanka galloped from 5.7% in September, to 7.6% in October, to 9.9% in November and to 12.1% in December.

In January, inflation galloped to 14.2% in February, inflation galloped to 15.1%.

Economists and the media had warned the central bank against money printing and modern monetary theory. The IMF also warned of what could happen unless money printing is not stopped quickly.

Related

Sri Lanka’s Modern Monetary Theory Experiment Could Be An Untamed Demon: Economist

Money printing in Sri Lanka, deficits could lead to economic implosion (IMF report)

Analysts and economists have called for a change in the law governing the central bank to restrict the domestic operations department, reduce the discretionary powers of the Monetary Board to prevent high inflation, currency unrest and social unrest. (Colombo/Mar07/2022)

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February review: ASX outperforms https://basketvillageusa.com/february-review-asx-outperforms/ Thu, 03 Mar 2022 03:30:17 +0000 https://basketvillageusa.com/february-review-asx-outperforms/

Australia | March 03, 2022

Gains in the energy and materials sectors offset technology losses, leading to a 2.1% total return for the ASX200 in February as Australia outperformed global equity markets.

-ASX200 gained 2.1% (total return) in February
-Value continues to outperform growth
-Energy and Materials were among the top performers while Technology lags behind
-JP Morgan plans nine U.S. interest rate hikes
in the next 12 months
-Australian 10-year bond yields climbed 13 basis points to 2.14%

Marc Woodruff

The ASX200 closed February with a total gain of 2.1% (including dividends).

From a broader perspective, the index is still down -7.6% from its peak in August last year.

The Australian market’s February performance was an outlier among its global peers and outperformed the MSCI Developed Markets Index by 648 basis points (in US dollars). The S&P500 in the US fell -3% while Europe ex-UK fell -4.3%. Meanwhile, the Nasdaq lost -3.4%, taking its year-to-date contraction to over -10%.

Since the start of 2022, markets have been rocked by fears of rising interest rates and rising geopolitical tensions as Russia first threatens and then invades Ukraine. These two forces have seen the MSCI World Index fall for two consecutive months, the first time since September and October 2020.

More positively, JP Morgan is leaning on history to suggest that stock markets remain generally resilient in the wake of Federal Reserve rate hikes and geopolitical tensions.

The local market received a significant boost from the full inclusion of BHP Group ((BHP)) in the index following the unification of its corporate structure, having abandoned its dual listing with London. The materials sector now makes up 25.1% of the index, down from 19.2% previously, and the world’s largest miner has taken over from Commonwealth Bank ((CBA)) as the largest weighting in the index. the index.

In Australia, the trend for Value stocks to outperform Growth continued.

Large caps held up better, reversing January’s losses, while their mid and small cap counterparts trended lower again.

In terms of sectors, Resources outperformed Industrials, with the Energy (8.65%) and Materials (5.25%) sectors posting strong performances, along with Commodities (5.7%) and banks (4%). Meanwhile, the technology sector continues to be a drag, with the discretionary sector also fading during the month.

In money markets, JP Morgan is above the market consensus in predicts nine U.S. interest rate hikes and the U.S. cash rate is expected to peak at 2.75% in the third quarter of 2023. For Australia, only one interest rate increase is expected by the end of the year, with an expected peak of 1% by the third quarter of 2023. The differential between the two countries is evident in the extent to which companies have referenced inflation in the respective earnings seasons, the broker suggests.

Meanwhile, Morgan Stanley is telling investors that if geopolitical tensions begin to ease, they will most likely look back to the first six weeks of the calendar year. It was a period characterized by persistent inflationary signals, rising rates and the continued drive of central banks to normalize monetary policy settings.

In the local currency market, the Australian dollar stood at 72.63 US cents at the end of February, up 2.8% over the month.

Best and worst stocks in the indices

Within the ASX50stocks with the highest returns included South32 ((S32)) which gained 24.9%, Northern Star Resources ((NST)) 24.4%, Woodside Petroleum ((WPL)) 23.8%, Newcrest Mining ((NCM)) 19.6%, Cochlear ((COH)) 15.8% and Endeavor Group with a return of 14%.

The worst performers in the ASX50 were Xero ((XRO)) which lost -17%, Seek ((SEK)) -8%, Aristocrat Leisure ((ALL) -7.6% and Sonic Healthcare ((SHL)) which lost -7.7%.


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Dollar Rising on Higher-Than-Expected U.S. Inflation, Fed Rate Hike Bets By Investing.com https://basketvillageusa.com/dollar-rising-on-higher-than-expected-u-s-inflation-fed-rate-hike-bets-by-investing-com/ Fri, 11 Feb 2022 03:31:00 +0000 https://basketvillageusa.com/dollar-rising-on-higher-than-expected-u-s-inflation-fed-rate-hike-bets-by-investing-com/

© Reuters

By Gina Lee

Investing.com – The dollar was higher on Friday morning in Asia, with stronger-than-expected U.S. inflation data and hawkish comments from a Federal Reserve policymaker accelerating expectations for aggressive interest rate hikes. However, similar pressures globally have limited the gains.

The trailing greenback against a basket of other currencies rose 0.32% to 95.852 at 10:19 p.m. ET (0319 GMT).

The pair edged up 0.06% to 116.08 as Japanese markets were closed for a holiday.

The pair was down 0.27% at 0.7146 and the pair was down 0.22% at 0.6654.

The pair edged up 0.10% to 6.3604 while it edged down 0.07% to 1.3546.

US inflation data showed the consumer price index (CPI) rose 7.5% and 0.6% in January. Core CPI rose 0.6% and 6% . He also encouraged that the Fed should raise rates by 100 basis points over the next three meetings.

US Treasuries rose and the dollar hit a five-week high against the yen in a volatile overnight session. The US currency also faltered against other currencies, before broadly firming earlier in the Asian session.

“There is certainly a sense of urgency at least for some (Fed) members,” Commonwealth Bank Of Australia strategist Kim Mundy told Reuters.

“But the Fed is not the only central bank facing this inflation conundrum,” with a hawkish pivot at the European Central Bank (ECB) over the past week likely to cap dollar gains by removing a headwind for the euro, added Mundy.

The ECB will update its economic projections in March 2022, as bond markets expect an even more hawkish turn. Swap pricing also indicates a nearly 30% chance that the Bank of England will raise interest rates by 50 basis points next month.

Even central banks that have taken a more dovish approach, such as the Reserve Bank of Australia (RBA), are changing their tune. RBA Governor Philip Lowe said earlier today that if the economic recovery hits forecasts, interest rate hikes could potentially take place in 2022.

The Australian dollar is forecast for a weekly rise of nearly 1% despite dollar strength on Friday, while its New Zealand counterpart is also heading for a second consecutive weekly gain.

Meanwhile, the Bank of Japan also pledged to buy an unlimited number of 10-year bonds at 0.25% on Thursday, in response to several days of selling pressure in the Japanese bond market.

Warning: Merged media would like to remind you that the data contained in this site is not necessarily real time or exact. All prices for CFDs (stocks, indices, futures) and Forex are not provided by exchanges but rather by market makers, and therefore prices may not be accurate and may differ from the actual market price, which which means that the prices are indicative and not suitable for commercial purposes. Therefore, Fusion Media assumes no responsibility for any business losses you may incur due to the use of this data.

Merged media or anyone involved with Fusion Media will accept no liability for any loss or damage resulting from reliance on the information, including data, quotes, charts and buy/sell signals contained in this website . Please be fully informed of the risks and costs associated with trading in the financial markets, it is one of the riskiest forms of investment possible.

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DWS FX Forecast 2022: Don’t Be Caught Off-Cut by Currency Fluctuations https://basketvillageusa.com/dws-fx-forecast-2022-dont-be-caught-off-cut-by-currency-fluctuations/ Tue, 01 Feb 2022 05:31:02 +0000 https://basketvillageusa.com/dws-fx-forecast-2022-dont-be-caught-off-cut-by-currency-fluctuations/

VScurrency markets are often overlooked and misunderstood. But as central banks consider further rate changes and inflation proves less transitory than expected, investors would do well to carefully consider the impact of exchange rates on their international equity allocations.

In the next webcast, DWS FX Forecast 2022: Don’t Be Caught Off-Cut by Currency FluctuationsJason Chen, DWS Senior Research Analyst, and Dr. Liang Ding, Co-Head of Currency Strategy, Macro Research, will discuss how international currency movements could affect global investments and portfolios in 2022, as well as how international currency hedging strategies can allow investors to play more pure in underlying foreign markets.

For example, a global game that hedges against currency fluctuations against the US dollar is the Xtrackers MSCI All World ex US Hedged Equity ETF (DBAW). DBAW seeks investment results that generally correspond to the performance of the MSCI ACWI ex USA US Dollar Hedged Index, which is designed to track the performance of equity securities in developed and emerging equity markets while mitigating exposure to fluctuations between the value of the USD and the currencies of the countries included in the underlying index.

the Xtrackers MSCI EAFE Hedged Equity ETF (DBEF) seeks investment results that generally correspond to the performance of the MSCI EAFE US Dollar Hedged Index. The index is designed to track the performance of developed markets while mitigating exposure to fluctuations between the value of the US dollar and the currencies of developed economies in Europe, Australasia and the Far East.

Emerging market investors can also turn to the same currency hedging strategy. In this case, it is the Xtrackers MSCI Emerging Markets Hedged Equity ETF (DBEM). DBEM seeks investment results that generally correspond to the performance of the MSCI EM US Dollar Hedged Index. The fund, using a “passive” or index-based investment approach, seeks investment results that generally correspond to the performance, before fees and expenses, of the underlying index, which is designed to track the performance of emerging markets while mitigating exposure to fluctuations between the value of the US dollar and the currencies of the countries included in the underlying index.

Financial advisors interested in learning more about international currency hedging strategies can register for the Tuesday, February 1 webcast here.

Learn more at ETFtrends.com.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Impending Fed rate hikes raise fears of deja vu in emerging markets | Debt News https://basketvillageusa.com/impending-fed-rate-hikes-raise-fears-of-deja-vu-in-emerging-markets-debt-news/ Tue, 25 Jan 2022 12:20:31 +0000 https://basketvillageusa.com/impending-fed-rate-hikes-raise-fears-of-deja-vu-in-emerging-markets-debt-news/

If there was one character in literature who best reflected the power the US Federal Reserve wields over the global economy, it would be Gulliver. Although he was a good guy who meant no harm, his very massiveness presented a danger to everyone around him – in this case, the Lilliputians of the global economy: emerging markets (EM).

But unlike Gulliver, the Fed is constitutionally prohibited from heeding cries of Lilliputian savings when crafting interest rate policy. The Fed’s dual mission is narrow and resolutely parochial: to use monetary policy to fight US inflation and maximize the US labor market. Preventing chaos in emerging markets is simply not a consideration.

Still, some EM chaos can beckon. On Tuesday, Federal Reserve policymakers will begin their first two-day meeting this year.

As 2021 drew to a close, the Fed shifted its focus away from supporting job creation by keeping borrowing costs low and towards containing inflation – which is nearing its highest level in 40 years.

To achieve this, it has signaled that it is preparing for at least three hikes in its benchmark interest rates this year.

Since then, speculation has swirled that getting inflation under control may require four rate hikes, not three, raising the stakes not just for the US economy but also for emerging markets.

The last time this happened…

When the Fed raises interest rates, Americans end up paying higher rates on mortgages and credit cards, while American businesses also see their borrowing costs rise. But the effects of the Fed’s takeoff don’t stop at the US border.

When the Fed raises interest rates, borrowing becomes more expensive around the world. This is especially true for countries that have so-called “dollarized debt” – nations that took advantage of more than a decade of low interest rates by issuing dollar-denominated sovereign bonds, and now face the prospect of refinancing these bonds under much less favorable conditions.

When the Fed raises interest rates, borrowing becomes more expensive around the world [File: Samuel Corum/Bloomberg]

This mix – Fed tightening combined with high debt or a misvalued currency in emerging countries – caused some difficulties in 2013, when the Fed began to “reduce” its post-2009 stimulus policy of buying US treasury bonds.

The impact, even in the biggest emerging markets, was swift and brutal as investors began moving dollars into “safe havens” like US Treasuries and exiting emerging investments. The outflow of US dollars from the Indian economy was so rapid that the rupee fell 15% in three months, forcing the Reserve Bank of India to raise rates.

India was not alone. Russia, Brazil, Turkey, Indonesia and other smaller emerging economies have suffered similar exits, sometimes exacerbated by political unrest or policy mistakes. As a market segment, emerging market bonds lost more than 10% of their value in 2013.

Different this time?

The Fed’s interest rate hikes simply cannot be ignored, if only for the reason that it is the steward of the world’s largest economy and global reserve currency, the dollar. Everything the Fed does has a ripple effect on stock prices, trade flows, supply chains, and sovereign bond and currency markets around the world.

Overall, economists and market analysts are confident that the improving state of emerging market balance sheets and generally good prospects for global economic growth in 2022 will limit the kind of upheaval seen in 2013.

Charles Robertson, chief economist at investment bank Renaissance Capital, told Al Jazeera that the Fed’s gradual tightening plan has been widely telegraphed, limiting the possibility of a “tantrum”. Either way, he said, “Fed hikes usually mean the global economy is doing well, which is good for emerging markets.”

Robertson, whose bank has a large presence in Russia, the former Soviet Union, the Middle East, North Africa and sub-Saharan Africa, said the strength of the US dollar, which could soar after the decision from the Fed and make it less likely that global traders will engage in a “carry trade” – an arbitrage strategy that prompts financial institutions to invest in high-interest emerging vehicles able to procure dollars from the Fed on the cheap.

Fed hikes usually mean the global economy is doing well, which is good for emerging markets.

Charles Robertson, Chief Economist for Renaissance Capital

But the tightening in Washington will limit the room for central banks and governments in emerging markets to continue to stimulate their economies. Rachel Ziemba, a well-known China expert and historian of emerging market economics, says the Fed’s rate hike will make it harder for many emerging economies to regain their pre-pandemic position.

As the year progresses, “it will become more evident that short-term international support for the most vulnerable developing economies has not translated into longer-term support”, she said. told Al Jazeera.

Ziemba noted that policymakers will need to address this issue at the upcoming April meetings of the International Monetary Fund and the World Bank as well as the upcoming Group of 20 summit: [debt service suspension] end and how do they cope with the lack of support from the private sector? Aggregate growth and domestic demand are struggling in many emerging countries, in part due to less stimulus capacity than in past crises, as well as market-based adjustments that incentivize fiscal and monetary policy restrictive.

But Ruchir Sharma, emerging markets specialist and chief global strategist at Morgan Stanley Investment Management, is a bit of an outlier, professing confidence that emerging economies could reverse a decade of slump this year despite Fed tightening.

HSBC, for its part, is monitoring what it calls the ‘fragile four’ – Indonesia, Brazil, Mexico and South Africa – for fear that their high levels of dollar indebtedness could make them particularly vulnerable. rising US interest rates. Analysts are also worried about Turkey, where soaring debt and a series of interest rate cuts last year in the face of soaring inflation – an unorthodox policy championed by President Recep Tayyip Erdogan – led the Turkish lira to collapse.

A customer browses through wool in a haberdashery store in Eskisehir, TurkeyIf the US Federal Reserve raises interest rates, Turkey is among the emerging markets that could feel the effects [File: Moe Zoyari/Bloomberg]

“President Erdogan is determined to challenge orthodox monetary policy,” Stephen Cook, Council on Foreign Relations expert on Turkey and the Middle East, told Al Jazeera. “It’s a recipe for more inflation, economic dislocation in the corporate sector and generally distrust of economic decision-making.” With Turkey’s foreign exchange reserves nearly depleted, its currency in freefall and its economy flirting with hyperinflation, Cook fears that any external shock could have disastrous consequences.

painful muscle memory

If this time is, indeed, different, one can hardly blame emerging-market central bankers and investment advisers who manage global capital flows for worrying, analysts say.

Ever since the implosion of the US mortgage bond market triggered the Great Recession in 2008, nations around the world have watched for signs that a sudden market turn or policy reversal would once again send shock waves. American economic policy, increasingly insular and rocked by populist dynamics unleashed by a decade of economic setbacks and futile wars, has ceased to claim to serve as a model for anything other than managing relative decline.

And 2013 was just the latest example of a Fed-triggered, US-centric global crisis. There was the 1994 “tequila crisis” in Mexico, which saw the collapse of the peso and a hastily organized US bailout; the Asian financial crisis of 1997-1998, which led to crushing recessions in the Philippines, South Korea, Thailand, Japan and Indonesia and contributed to the overthrow of the latter’s dictator, Suharto; and the Russian ruble crisis of 1998, which, in retrospect, wiped out post-Soviet free-market reforms and helped put President Vladimir Putin into office.

Kavaljit Singh, director of the New Delhi Public Interest Research Center, said analysts who dismiss a “Taper Tantrum 2.0” take an overly optimistic view of the economic strength of emerging markets amid the global coronavirus pandemic. . While Singh agrees that emerging market balance sheets are in better shape today than they were in 2013, he argues that the huge spending and growth spurts associated with pandemic relief and stimulus could offset these structural improvements in stocks. Emerging Markets and Developing Economies (EMDE).

“The uneven global distribution of COVID-19 vaccines has led most EMDEs to lag behind their advanced peers,” Singh wrote in the widely read economic Blog Thread. “The slow pace of vaccinations in EMDEs makes them increasingly vulnerable to new waves of infection and the spread of virus variants. The risk of future lockdowns is holding back investment and consumption, thus delaying economic recovery in EMDEs.

Markets continue to view the March Fed meeting as the most likely start to rate hikes as the Omicron variant of the coronavirus once again reminds global markets that there is more than one invisible hand at play. By then, US inflation may have eased somewhat and a clearer trajectory for US and global growth may have emerged, eliminating the need for sharp spikes that would almost certainly bring instability to emerging markets. .

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Interest rate, oil price and dollar https://basketvillageusa.com/interest-rate-oil-price-and-dollar/ Tue, 18 Jan 2022 23:53:42 +0000 https://basketvillageusa.com/interest-rate-oil-price-and-dollar/

SINGAPORE — Asia-Pacific markets looked poised for a lower start on Wednesday after an overnight selloff on Wall Street.

Nikkei futures indicated opening declines for the Japanese benchmark at the top of the hour.

In Australia, the ASX 200 fell 0.67% in early trading, with most sectors trading lower. The heavily weighted financial services sub-index fell 0.96% as the country’s major banks were liquidated.

“Stock markets fell while oil stocks gained overnight as markets expect central banks to need to raise rates faster to control inflation,” analysts wrote. ‘ANZ Research in a Wednesday morning note.

In the United States, the Dow Jones Industrial Average fell more than 540 points after Goldman Sachs shares sold off as the investment bank missed analysts’ earnings expectations. The S&P 500 as well as the Nasdaq Composite, which includes interest rate sensitive technology stocks, also fell sharply.

Currencies and Oil

In the currency market, the US dollar rose 0.49% to 95.726 against a basket of its peers, falling from a previous level around 95.129.

CNBC Pro Stock Picks and Investing Trends:

Analysts at ANZ Research said rising US bond yields weighed on risk appetite and gave the world’s main reserve currency a boost.

The yield on the 10-year Treasury rose above 1.87% on Tuesday, its highest level in 2 years, after starting the new year at around 1.5%. The 2-year rate, which reflects short-term interest rate expectations, exceeded 1% for the first time in two years.

The Japanese yen changed hands at 114.58 to the dollar while the Australian dollar traded almost at $0.7187.

Oil prices hit a seven-year high overnight after Houthi rebels in Yemen claimed responsibility for a deadly attack in Abu Dhabi earlier this week, sparking fresh tensions in the region. The United Arab Emirates have vowed to retaliate against them.

International benchmark Brent as well as US crude futures rose more than 1% and 2% respectively, with both oil contracts hitting their highest level since October 2014 earlier in the session.

“Global oil demand continues to be resilient despite the latest surge in Covid-19 cases due to the highly transmissible omicron variant,” Vivek Dhar, mining and energy commodity analyst at Commonwealth Bank of Australia, said in a statement. a morning note.

He explained that oil demand is sensitive to Covid-19, especially Covid-related lockdowns and restrictions, more than other commodities, as around two-thirds of global oil consumption is mobility-related.

“Fears are fading, however, that the omicron variant will cripple oil consumption,” he wrote, adding that jet fuel consumption, for example, continues to rise.

During Asian trading hours on Wednesday, U.S. crude was up 1.69% at $86.87 a barrel.

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How blockchain can help companies improve asset management, interview with AXA Investment Managers https://basketvillageusa.com/how-blockchain-can-help-companies-improve-asset-management-interview-with-axa-investment-managers/ Sun, 16 Jan 2022 08:00:57 +0000 https://basketvillageusa.com/how-blockchain-can-help-companies-improve-asset-management-interview-with-axa-investment-managers/

Since its inception, blockchain has been considered one of the most promising technologies, which will impact our lives for decades. Many companies and institutions have tried to implement it, but critics believe that blockchain is still in its infancy.

We know blockchain has the ability to disrupt multiple sectors of finance, including asset management, so we caught up with Laurence Arnold, Head of Innovation Management Strategic Initiatives at AXA Investment Managers, a firm with more of $1 trillion in assets under management (AUM) to discuss. That’s what she told us.

Q: Can you tell us about AXA Investment Managers, what assets are you interested in and why does the company believe blockchain technology has such great potential?

A: In 2021, cryptocurrencies have again attracted global interest. Yet, as a traditional asset manager, the real strategic interest lies not so much in this “new” asset class, but rather in the underlying technologies and their disruptive power to asset management processes.

Blockchain has the potential to impact every layer of an asset manager’s operations by dramatically reducing industry complexity, thereby significantly influencing productivity and profitability trends for the industry as a whole.

Over the past decade, initiatives around blockchain technology in the asset management industry have been experimental. There was no concrete implementation and it was unclear how and when this technology could be scaled up and matured. However, the past year has seen a rapid escalation in activity, quickly bringing blockchain to the forefront of the asset management landscape.

Platforms have acquired new ways to distribute funds, central banks are working on digital currencies in response to potential private digital means of payment, and regulators are designing new frameworks. In April, the European Investment Bank issued a €100 million digital bond on Ethereum – a decentralized, open-source blockchain, and the US Fed has been in talks for months over whether to issue its own form. of digital currency. At the same time, the broader world of decentralized finance (DeFi) and cryptocurrencies is expanding. Overall, our financial framework is being thoroughly overhauled.

At AXA IM, we are therefore leading several Blockchain initiatives both in fund distribution and portfolio management, for our alternative and core platforms. The tokenization of assets opens up many opportunities.

Q: From supply chain to tokenization of real-world assets and artwork, blockchain has seen many use cases, how can it be applied to asset management? And can people and institutions benefit from this application?

A: From fund distribution to investments, trading and post-trade processes, blockchain technology mainly impacts middle and back-office procedures. The fund distribution business is an interesting case for blockchain technology. Processes are fragmented in different local markets; the number of intermediaries is high and permanent reconciliations are necessary. A lack of transparency and expensive distribution models add up to (good) reasons to leverage technology in this space. Funds tokenization – issuance of funds on the blockchain – and automated subscriptions alongside redemption flows via smart contracts bring major efficiency gains. Additionally, tokenization also enables splitting. This has multiple benefits – it can attract new retail investors with lower amounts of capital and create liquidity for funds that hold illiquid assets. Financial securities have the potential to be issued on the blockchain, which could in turn reduce issuance costs, streamline settlement processes, reduce reconciliations between financial institutions and, at target, enable a cycle of fully automated asset life.

Q: What do you see as the main real-world use case for blockchain in the coming years and how is AXA Investment Managers preparing for a potential increase in adoption?

A: Today, change is already underway in B2C models. With the advent of digital currencies, some of the mutual fund distribution business could move from bank tellers to digital platforms and the use of blockchain technologies could accelerate this trend towards decentralization.

For the financial services industry, blockchain has yet to become a priority, in part due to the stigma surrounding its use in unregulated cryptocurrencies, such as Bitcoin. Blockchain poses challenges to the assumptions of the structure of many financial services industries. But the potential for growth and renewal in an industry struggling with lower margins is there to be realized.

At AXA IM, we recently concluded our first market transaction based on a blockchain infrastructure in collaboration with Société Générale-Forge. Via our Fixed Income platform, we purchased from Société Générale 3 million euros of “unsecured” bonds issued by the European Investment Bank (EIB) in the form of “security tokens” on the public Ethereum blockchain.

This transaction is part of our innovation journey because we are committed to carrying out tests in our changing ecosystem, to discovering new techniques, new markets with the desire to serve and share our knowledge with our customers.

Regulations are changing rapidly and financial institutions such as central banks are already devoting resources to these topics. Although in order to be able to evolve, the industry will have to establish standards, the regulations will have to be clearly defined, the technology will have to evolve (standardization, interoperability, energy consumption, …) and in addition to tokenization assets, fiat currencies will also have to must be on-chain to deliver the full potential of automated asset lifecycles.

Q: Do you agree with some regulators and institutions that have claimed that cryptocurrencies, such as Bitcoin, are a secondary application for blockchain? What do you think of the value of this nascent asset class as it could potentially be integrated into traditional business models?

A: There is a lot of uncertainty around regulation, and we find the questions around stablecoins to be the most interesting. In our opinion, the backstop is a key distinguishing feature of stablecoins. This is a critical design feature, likely to influence the adoption path of any nascent digital currency. The idea is to limit the excessive price fluctuations typical of cryptocurrencies, thereby aligning the new digital currency with existing traditional currencies: processing transactions against existing arrangements… Developers of crypto-assets labeled “stablecoins” seek to reduce volatility by anchoring the “wedge” to a reference asset (eg a sovereign currency) or to a basket of assets.

In the absence of comprehensive regulation, the benefits of adopting stablecoins for our monetary system are likely to be less than a CBDC (e.g. counterparty risk, non-standard format, non-universal means of payment, etc.) . Nonetheless, a hybrid model should also be considered, one in which “the public sector could focus on issuing digital coins and delivering sound currency, while the private sector could build rails and apps” .

With several options on the table, our impression is that a coherent regulatory framework will always be the instrument of choice for policymakers to better align incentives and risks. In the meantime, at AXA IM, we will continue to seek opportunities around the world to fully implement digital asset lifecycles, which will allow us to project future operating models.

Q: In this sense, how do you and AXA Investment Managers envision the future of finance? A system where only CBDCs or cryptocurrencies can exist, or do you think the world is heading towards a hybrid financial system where everyone can choose their preferred way of transacting or settling financial transactions?

A. The recent proliferation of blockchain-based solutions adds to the complexity of our existing financial ecosystem. There will be no big bang; things are progressing step by step, but always much faster than expected. There will likely be a hybrid financial system and a convergence towards a decentralized and even more automated ecosystem. The complexity it generates in the short term and the many uncertainties (regulations, treasury, standards, etc.) will have to be addressed quickly to trigger the profound change that Blockchain can bring to our industry. The DeFi world brings many innovations and new ideas that can benefit our industry. Backed by solid analyzes and real experimentation, AXA IM wishes to actively contribute to this transformation, while being fully aligned with the interests of our clients.

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Major banks’ forecasts for 2022: JPY, GBP, CAD, AUD, CHF, SEK, CNH https://basketvillageusa.com/major-banks-forecasts-for-2022-jpy-gbp-cad-aud-chf-sek-cnh/ Sat, 01 Jan 2022 14:13:03 +0000 https://basketvillageusa.com/major-banks-forecasts-for-2022-jpy-gbp-cad-aud-chf-sek-cnh/

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We talked a week ago about what experts at the world’s biggest banks and agencies think about the behavior of the EUR / USD pair through 2022. And the fact that we paid attention to it in the first place makes some sense. : after all, this pair is the most traded in the Forex market, and the European currency itself leads with a huge margin in the formation of the DXY US dollar index, with 57.6%.

Recall that DXY was developed by the US Federal Reserve in 1973 and shows the ratio of the US dollar to a basket of 6 major world currencies. This basket includes the euro (57.6%), the Japanese yen (13.6%), the pound sterling (11.9%), the Canadian dollar (9.1%), the Swedish krona (4.2 %) and the Swiss franc (3.6%).

In our opinion, the economic situation in the world has changed a lot in the almost half a century since DXY was founded. And at least the Chinese yuan should have appeared in the basket. Therefore, below we will take a look at the outlook for the two currency pairs that make up the dollar index: USD / JPY, GBP / USD, USD / CAD, USD / SEK, USD / CHF and a few others, AUD / USD, NZD / USD, EUR / GBP and USD / CNH.

USD / JPY: Japan needs a weak yen

We know that inflation, along with the recovery of the labor market, is one of the two main factors on which central banks focus in their monetary policy.

The positive GDP gap is also called the inflation gap because it indicates that the growth of aggregate demand exceeds the growth of aggregate supply and accelerates inflation. This, according to the IMF, will be observed in the United States (+ 3.3%) and Canada (+ 0.8%) in 2022. And regulators will have to take active measures to tighten their monetary policy in order to contain the inflation. And this, according to experts from the Dutch banking group ING (Internationale Nederlanden Groep), will give the currencies of these countries, mainly the USD, an advantage over the currencies of countries where the GDP has a negative spread. It is also called recession because excess supply over demand is the path to deflation.

The recession gap has been observed since 2008 in Japan and is expected to repeat in 2022. This is why the Bank of Japan’s policy is one of the most accommodating among the central banks of other countries, and the interest rate on the yen has long held a negative level, minus 0.1%.

Bank of Japan chief Haruhiko Kuroda recently said that a weak yen would rather help the country’s economy than hurt it. According to the senior official, if the yen falls, it will support exports and corporate profits.

The ING group believes that such a differentiation between the approaches of the US Federal Reserve and the Japanese regulator will strengthen the dollar’s position against the yen. Their quarterly forecasts for USD / JPY for this year is: Q1 – 114.00, Q2 – 115.00, Q3 – 118.00 and Q4 – 120.00.

French financial conglomerate Societe Generale estimates the probability that the pair will rise to 116.00 in the second quarter at 50%, and up to 118.00 – 25%. Experts are betting the remaining 25% on a bearish scenario and the pair falling to 110.00.

Analysts from other major global banks also prefer the dollar. However, unlike their ING counterparts, a number of forecasts peak not at the end, but in the middle of the year. Barclays Bank forecasts look like this: Q1 – 115.00, Q2 – 116.00, Q3 – 116.00 and Q4 – 115.00. Forecasts from CIBC (Canadian Imperial Bank of Commerce) paint a similar picture: T1 – 115.00, T2 – 116.00, T3 – 115.00, T4 – 114.00.

Reuters polled the biggest banks represented on Wall Street and published their experts’ opinion on the stocks of the USD / JPY pair in the second half – end of 2022. For the most part, forecasts point to a strengthening of the dollar: JP Morgan Q3 – 114.00, Amundi Q4 – 116.00, Morgan Stanley Q4 – 118.00. On the contrary, Goldman Sachs estimates that the pair will fall to 111.00 in 2023.

GBP / USD: at the crossroads of three roads

Regarding the future of the British currency, British investment Barclays Bank has taken a very patriotic position. Its strategists consider the pound to be strongly undervalued and predict that the GBP / USD The pair will return to 2021 highs and climb to 1.4200 by the end of the year.

Unlike most investment banks, Barclays believes that the US Federal Reserve’s policy does not provide strong support for the US dollar at all, which will lead to its moderate depreciation. The Bank expects other central banks to take a more aggressive stance than the Fed, with higher interest rates, thus limiting the attractiveness of the dollar. First of all, of course, we are talking about the Bank of England here.

As for the pound’s short-term outlook, Barclays analysts are more cautious here, as the impact of high inflation will neutralize potential support from a slight increase in interest rates. In addition, concerns about the new wave of COVID-19 and the difficulties with the EU due to Brexit must be taken into account. As a result, Barclays’ quarterly forecast is: Q1 – 1.3300, T2 – 1.3700, Q3 – 1.4000 and Q4 – 1.4200.

Capital Economics, one of the UK’s leading independent research centers, has taken the opposite position. Its specialists, on the contrary, anticipate a weakening of the pound, and evoke a combination of 1) weak economic growth, 2) slowing inflation and 3) sluggishness of the Bank of England. These three factors may lead the UK regulator to raise the rate to just 0.5% in the coming months instead of 1.0%, and thus disappoint the markets.

But, in addition to the growth and decline of the British currency, there is a third scenario. Analysts at ING Group predict that the pound will sit somewhere in the middle of a triangle made up of a stronger US dollar, stable commodity currencies and weaker low-yielding currencies. Therefore, according to their scenario, the GBP / USD The pair will move in a sideways trend: Q1-1.3300, Q2-1.3400, Q3-1.3400 and Q4-1.3400.

Other currency pairs

If Barclays Bank believes in its national currency, specialists at CIBC (Canadian Imperial Bank of Commerce) are quite pessimistic about the future. They believe the Canadian dollar could weaken this year. “Markets have overestimated possible Bank of Canada stocks in 2022,” says CIBC, “and underestimated the Fed in 2022. The recalibration will leave the CAD out of favor with investors. »The bank’s forecasts for the USD / CAD the pair is: Q1-1.2800, Q2-1.2900, Q3-1.3000 and Q4-1.3000.

Experts from HSBC (Hong Kong and Shanghai Banking Corporation) believe that some currencies may still hold up against the stronger US dollar, notably the Australian dollar. HSBC believes the Reserve Bank of Australia could take a more hawkish stance, given the rather solid macro data.

ING strategists also do not rule out that the Australian dollar may benefit from an undervaluation and oversold. However, taking long positions in the AUD / USD pair, in their opinion, always carries a high risk.

In addition, according to ING experts, together with the euro (EUR / USD) and the Japanese yen (USD / JPY), the Swiss franc will also lag significantly behind the dollar (USD / CHF) in 2022 as well as the Swedish krona (USD / SEK).

Barclays Bank’s forecasts for other currency pairs included in brokerage firm NordFX’s palette of trading instruments are as follows: EUR / GBP : T1 – 0.87, T2 – 0.86, T3 – 0.85, T4 – 0.84 | USD / CHF : T1 – 0.91, T2 – 0.90, T3 – 0.90, T4 – 0.90 | AUD / USD : T1 – 0.75, T2 – 0.76, T3 – 0.77, T4 – 0.78 | NZD / USD : Q1 – 0.73, Q2 – 0.73, Q3 – 0.73, Q4 – 0.73 | USD / CAD : T1 – 1.23, T2 – 1.22, T3 – 1.21, T4 – 1.21 | USD / CHN : T1 – 6.35, T2 – 6.30, T3 – 6.40, T4 – 6.50.

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