The uncertainty associated with the outcome of the referendum on Britain’s EU membership is already affecting financial markets and the wider economy. By examining the pricing of derivatives, we can identify the price the market is putting on this uncertainty, and what movements in currency are expected between now and the referendum itself.
Growth outperformance matters in EM over the long run, but capital flows drive short run returns in the asset class. We believe there are complementarities between both.
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?
• The recent uptick of Chinese demand for copper and low levels of warehouse stocks give a misleading picture of the state of the copper market.
• Taking a broader view of stocks, we suggest that there is a substantial amount of “missing copper”, large portions of which are held by the Chinese State reserve Bureau (SRB).
• The policy of the latter in 2016 is therefore key to the performance of copper.
• Does the recent weakness and volatility in the CNH spot and short-tenor forward market herald a new era of Chinese capital outflows?