Since the US presidential election on November 9th, markets generally have welcomed the more conciliatory tone from the President-elect Donald Trump. How have currency markets reacted, how might the changing economic environment affect hedging decisions, and what does this mean for currency returns?
About Andrew Bloomfield
Andrew Bloomfield is an Associate Director in the Research Team at Record. Andy holds a BSc in Economics from the University of Surrey and before joining Record worked on the Economic Research desk at J.P. Morgan. He is working towards his CFA charter, is a keen skier and enjoys the occasional game of firstname.lastname@example.org
Entries by Andrew Bloomfield
The US dollar is at an inflection point. Can the dollar’s cycle continue in the face of convergent economic fundamentals and central bank coordination?
In response to almost a decade of QE and with little discernible effect, central bankers have resorted to negative interest rates. What is the zero lower bound and will below zero rates have the desired effect?
If negative interest rates fail to halt deflationary momentum, could more extreme options such as ‘helicopter money’ be a viable next step?
• In this blog post we offer our thoughts on three strategically important questions regarding China’s macroeconomic and FX policy, for which there appears to be little consensus.
• A disaggregation of the decline in foreign exchange reserves and the balance of payments reveal some less sinister causes of reserve drawdowns and capital outflows
• Looking at the bigger picture, we believe China is stuck in an uncomfortable position within the “impossible trinity” and see further exchange rate and capital account liberalisation key factors in finding a new equilibrium.
• A combination of lower oil prices and the weak Yen have both helped restore the trade balance to health but a naïve scenario analysis suggests the trade balance is still subject to uncertainty from energy price and exchange rate dynamics.
• Worries may eventually shift from energy issues to saving rates – a shift in corporate saving behaviour, which has in the past shielded Japan’s external balance from declining household saving rates could have repercussions for the current account.
• The initial details of the bail-out suggest that over the next three years, Greece’s hard-line creditors could be largely ‘paid-off’, leaving the door open to debt renegotiation further down the line.
• While Greece is required to make further sacrifices in the form of asset privatization, the deal postpones economic and humanitarian consequences of Euro exit.
• As always, there are significant uncertainties surrounding long run feasibility including primary surplus and asset sale revenue assumptions.