FX Outlook EUR prospects. Emmanuel Ng Treasury Research & Strategy Global Treasury, OCBC Bank 24 Jan 2017

Transcription

1 FX Outlook EUR prospects Emmanuel Ng Treasury Research & Strategy Global Treasury, OCBC Bank 24 Jan 217

2 1/1/28 1/7/28 1/1/29 1/7/29 1/1/21 1/7/21 1/1/211 1/7/211 1/1/212 1/7/212 1/1/213 1/7/213 1/1/214 1/7/214 1/1/21 1/7/21 1/1/216 1/7/216 1/1/217 Jan-8 Sep-8 May-9 Jan-1 Sep-1 May-11 Jan-12 Sep-12 May-13 Jan-14 Sep-14 May-1 Jan-16 Sep-16 1-Jan-1 1-Mar-1 1-May-1 1-Jul-1 1-Sep-1 1-Nov-1 1-Jan-16 1-Mar-16 1-May-16 1-Jul-16 1-Sep-16 1-Nov-16 1-Jan-17 2 Policy dichotomy still expected to structurally weigh on the. Thus, despite firming inflation expectations surrounding the EZ, resultant implied rate differentials across various metrics remain a main driver. Apart from the FOMC, evolution and shelf life of the Trump trade may be key US-EZ 1X2y diff US-EZ yy diff Actual Fitted

3 3 EUR will also be weighed by potential political baggage this year. Still early days yet for the ECB to publicly acknowledge and consider a QE tapering balance sheet arguments to weigh on the common unit. Weight of balance of payments flows also argue against EUR outperformance. Ratio: FED-ECB Balance Sheet (6MMA) EZ: Basic Balance vs. EUR NEER EUR bn 6M % chg Dec-29 Dec-21 Dec-211 Dec-212 Dec-213 Dec-214 Dec-21 Dec Jan-211 Jul-211 Jan-212 Jul-212 Jan-213 Jul-213 Jan-214 Jul-214 Jan-21 Jul-21 Jan-216 Jul-216 Jan-217 Jul FED-ECB Bal Sheet Ratio:6MMA 6MMA EUR BB: 12mma, diff, lead 9 EUR NEER: 6mma

4 31/1/22 31/1/23 3/1/24 31/1/2 31/1/26 31/1/27 31/1/28 3/1/29 29/1/21 31/1/211 31/1/212 31/1/213 31/1/214 3/1/21 29/1/216 31/1/22 31/1/23 3/1/24 31/1/2 31/1/26 31/1/27 31/1/28 3/1/29 29/1/21 31/1/211 31/1/212 31/1/213 31/1/214 3/1/21 29/1/216 29/8/28 31/8/29 31/8/21 31/8/211 31/8/212 3/8/213 29/8/214 31/8/21 31/8/216 Despite an improving EZ economy, relative differences in macro fundamentals in relation to the US still favor the USD at this juncture % yoy 6M lead % yoy EUR NEER EZ Leading Index Relative leading indicator Realtive Man PMI Index (lead 3) 4

5 4-Jun-8 19-Feb-9 6-Nov-9 24-Jul-1 1-Apr Dec Sep May Feb Oct Jul-1 3-Apr Dec-16 3/1/28 3/1/29 3/1/21 3/1/211 3/1/212 3/1/213 3/1/214 3/1/21 3/1/216 3/1/217 Relative macro surprises on a structural horizon also seem to portend a southbound M lead OCBC EZ MSI 6m % m% M MSI 6M Rel MSI (6M Lead)

6 Treasury Market Research & Strategy Disclaimer Selena Ling Tel : (6) Emmanuel Ng (NgCYEmmanuel@ocbc.com) Tel : (6) Wellian Wiranto (WellianWiranto@ocbc.com) Tel : (6) Tommy Xie Dongming (XieD@ocbc.com) Tel : (6) Barnabas Gan (BarnabasGan@ocbc.com) Tel : (6) Terence Wu (TerenceWu@ocbc.com) Tel : (6) OCBC Credit Research Andrew Wong (WongVKAM@ocbc.com) Tel : (6) Wong Liang Mian (NickWong@ocbc.com) Tel : (6) Ezien Hoo (EzienHoo@ocbc.com) Tel : (6) Wong Hong Wei (WongHongWei@ocbc.com) Tel : (6) This publication is solely for information purposes only and may not be published, circulated, reproduced or distributed in whole or in part to any other person without our prior written consent. This publication should not be construed as an offer or solicitation for the subscription, purchase or sale of the securities/instruments mentioned herein. Any forecast on the economy, stock market, bond market and economic trends of the markets provided is not necessarily indicative of the future or likely performance of the securities/instruments. Whilst the information contained herein has been compiled from sources believed to be reliable and we have taken all reasonable care to ensure that the information contained in this publication is not untrue or misleading at the time of publication, we cannot guarantee and we make no representation as to its accuracy or completeness, and you should not act on it without first independently verifying its contents. The securities/instruments mentioned in this publication may not be suitable for investment by all investors. Any opinion or estimate contained in this report is subject to change without notice. We have not given any consideration to and we have not made any investigation of the investment objectives, financial situation or particular needs of the recipient or any class of persons, and accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of the recipient or any class of persons acting on such information or opinion or estimate. This publication may cover a wide range of topics and is not intended to be a comprehensive study or to provide any recommendation or advice on personal investing or financial planning. Accordingly, they should not be relied on or treated as a substitute for specific advice concerning individual situations. Please seek advice from a financial adviser regarding the suitability of any investment product taking into account your specific investment objectives, financial situation or particular needs before you make a commitment to purchase the investment product. OCBC and/or its related and affiliated corporations may at any time make markets in the securities/instruments mentioned in this publication and together with their respective directors and officers, may have or take positions in the securities/instruments mentioned in this publication and may be engaged in purchasing or selling the same for themselves or their clients, and may also perform or seek to perform broking and other investment or securities-related services for the corporations whose securities are mentioned in this publication as well as other parties generally. Co.Reg.no.:193232W 6