May 18th, FX Market Headlines. United States. United Kingdom. Eurozone. Japan. Australia

Transcription

1 May 18th, 2015 FX Market Headlines United States United Kingdom Eurozone Japan Australia

2 Important Disclosure Citi analysts refers to investment professionals within Citi Research ( CR ), Citi Global Markets Inc. ( CGMI ) and voting members of the Citi Global Investment Committee. This document is based on information provided by Citigroup Investment Research, Citigroup Global Markets, Citigroup Global Wealth Management and Citigroup Alternative Investments. It is provided for your information only. It is not intended as an offer or solicitation for the purchase or sale of any security. Information in this document has been prepared without taking account of the objectives, financial situation or needs of any particular investor. Accordingly, investors should, before acting on the information, consider its appropriateness, having regard to their objectives, financial situation and needs. Any decision to purchase securities mentioned herein should be made based on a review of your particular circumstances with your financial adviser. Investments referred to in this document are not recommendations of Citibank or its affiliates. Although information has been obtained from and is based upon sources that Citibank believes to be reliable, Citi analysts do not guarantee its accuracy and it may be incomplete and condensed. All opinions, projections and estimates constitute the judgment of the author as of the date of publication and are subject to change without notice. Prices and availability of financial instruments also are subject to change without notice. All forecasts are expressions of opinion, are not a guarantee of future results, are subject to change without notice and may not meet our expectations due to a variety of economic, market and other factors. Past performance is no guarantee of future performance. Real results may vary. The document is not to be construed as a solicitation or recommendation of investment advice. Subject to the nature and contents of the document, the investments described herein are subject to fluctuations in price and/or value and investors may get back less than originally invested. Certain high-volatility investments can be subject to sudden and large falls in value that could equal the amount invested. Certain investments contained in the document may have tax implications for private customers whereby levels and basis of taxation may be subject to change. Citibank does not provide tax advice and investors should seek advice from a tax adviser. Other Sources: Reuters, Bloomberg, CIRA. Products are (i) not insured by any government agency; (ii) not a deposit or other obligation of, or guaranteed by, the depository institution; and (iii) subject to investment risks, including possible loss of the principal amount invested. If this presentation shows information coming from Citi Research (CR), please refer to the attached link: which contains important disclosures regarding companies covered by Citi's Equity Research analysts. For details on the CR ratings system, please refer to: 3D Citibank N.A., London Branch is authorised and regulated by the Office of the Comptroller of the Currency (USA) and authorised by the Prudential Regulation Authority. Subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from us on request. Our firm reference number with our UK regulators is Citibank International Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Our firm reference number with our UK regulators is Citibank N.A., London Branch is registered as a branch in the UK at Citigroup Centre, Canada Square, Canary Wharf, London E14 5LB. Registered number BR Citibank International Limited has its registered office at Citigroup Centre, Canada Square, Canary Wharf, London E14 5LB. Registered number In Jersey, this document is communicated by Citibank N.A., Jersey Branch which has its registered address at PO Box 104, 38 Esplanade, St Helier, Jersey JE4 8QB. Citibank N.A., Jersey Branch is regulated by the Jersey Financial Services Commission. Citibank N.A. Jersey Branch is a participant in the Jersey Bank Depositors Compensation Scheme. The Scheme offers protection for eligible deposits of up to 50,000. The maximum total amount of compensation is capped at 100,000,000 in any 5 year period. Full details of the Scheme and banking groups covered are available on the States of Jersey website or on request. Citibank N.A. is incorporated with limited liability in the USA. Head office: 399 Park Avenue, New York, NY 10043, USA. Citibank N.A CITI, CITI and Arc Design are registered service marks of Citigroup Inc. Calls may be monitored or recorded for training and service quality purposes.

3 FX Forecasts (April 2015): Quarterly Forecasts Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 G10 Euro EURUSD Japanese Yen USDJPY British Pound GBPUSD Swiss Franc USDCHF Australian Dollar AUDUSD New Zealand Dollar NZDUSD Canadian Dollar USDCAD Dollar Index DXY G10 Crosses Japanese Yen EURJPY British Pound EURGBP Swiss Franc EURCHF Swedish Krona EURSEK Norwegian Krone EURNOK Norwegian Krone NOKSEK Australian Dollar AUDNZD Australian Dollar AUDJPY Asia Chinese Renimbi USDCNY Hong Kong Dollar USDHKD Indonesian Rupiah USDIDR India Rupee USDINR Korean Won USDKRW Malaysian Ringgit USDMYR Philippine Peso USDPHP Singapore Dollar USDSGD Thai Baht USDTHB Taiwan Dollar USDTWD EMEA Czech Koruna EURCZK Hungarian Florint EURHUF Polish Zloty EURPLN Israeli Shekel USDILS Russian Rouble USDRUB Russain Rouble Basket RUBBASK Turkish Lira USDTRY South African Rand USDZAR LATAM Brazilian Real USDBRL Chilean Peso USDCLP Mexican Peso USDMXN Colombian Peso USDCOP Source: Citi Research 15/05/15

4 Structural economic changes weigh on inflation United States: Citi analysts believe globalization, particularly the increased foreign production of domestically consumed goods, appears to have flattened the US Phillips Curve by altering the relationship between labor market slack and consumer prices. As more goods production occurs abroad, those formerly employed in domestic goods-producing sectors have migrated into the service sectors. Citi analysts believe this has contributed to a glut of workers seeking employment in the low-wage service sectors. Consequently, Citi analysts believe wage pressures have eased structurally (despite the decline in the unemployment rate) as workers compete for available jobs. This structural change to US consumer price determination could be one reason why the FOMC s (Federal Open Market Committee) inflation projections have been consistently too optimistic for the past 4 years. United Kingdom: Do not expect unbudgeted fiscal tightening UK governments have announced substantial extra fiscal tightening especially tax hikes in the year after each of the last five elections (1992, 1997, 2001, 2005, 2010). A rerun, if it happens, would clearly pose a downside risk to the economy. However, in contrast to that historical pattern, Citi analysts expect that the recent election will not be followed by more fiscal tightening than already contained in the pre-election Budget plans. Hence, fiscal policy is unlikely to pose a threat to the expansion There is no hidden black hole in the public finances, and Citi analysts see the fiscal deficit as likely to continue to undershoot official forecasts. Moreover, the pre-election Budget plans already included enough fiscal restraint in coming years to meet the government s existing fiscal targets and the tougher fiscal target likely to be introduced soon. The government is unlikely to aim to front-load fiscal tightening to a greater extent, because of the risk that such a policy could derail the recovery and thereby make it harder to win an EU referendum (expected in 2017 or so). Eurozone: Spanish regional elections could give a preview to national elections later 2015 Spain will hold regional elections in 13 (out of 17) regions on 24 May. The electoral contest will be important for the political and fiscal outlook of Spain both near term and long term given i) the large degree of fiscal autonomy enjoyed by the Spanish regions and ii) the short period to the national parliamentary elections due by December The regional ballot is likely to confirm the fracturing of Spain s two-party system increasing risks of hung regional parliaments. This could increase political uncertainty across regions and limit potential legislative initiatives (including those related to fiscal consolidation) in the years ahead, in Citi analysts view. Regional elections could be a preview of national elections due by December The rise in support for political alternatives suggests political fragmentation could likely become a feature of Spain s political landscape, increasing risk of political inaction. Yet, electoral surprises (as seen in the UK

5 national elections) cannot be ruled out, given the sharp improvement in economic conditions. Japan: Citi Analysts expect a slow in GDP Citi analysts estimate that Q1 consumer spending grew only QoQ. This would be slower than the 0.5% gain in the fourth quarter of If Citi analysts are correct, consumer spending in the first quarter would be 2.0% lower than the level in the fourth quarter of 2013, before frontloaded demand ahead of the tax hike accelerated. Private consumption appears to be weaker than suggested by improving labour and income conditions with total real employment income (per-capita wages times employment divided by CPI) this March expected to have largely returned to the pre-tax hike levels. This picture stands in a stark contrast with the fact that real consumer spending remains well below pre-tax hike levels. in part because of weaker consumption Spending by pensioners may be the culprit behind sluggish consumer spending. Pensioners weighting in the total population rose to 31% in fiscal year 2013 from 21% in 1997, suggesting an increasing impact from spending by pensioners on overall consumer spending. But the real purchasing power of pensioners fell 4.2% in 2014 due to the consumption tax hike and modest cuts in public pensions. In fiscal year 2015, the public pension will be raised by 0.9%, the first increase in 16 years, starting in June. If inflation remains close to zero this year, the public pension would increase in real terms for the first time since However, if the CPI rises around 1%, as the BoJ currently anticipates, the real purchasing power of pensioners would remain largely flat. This might lead to another undershooting of consumer spending versus the Bank of Japan s optimistic view. Australia: Concerns in property market Citi analysts forecast that the prudential regulators will have to change their tact in dealing with an overheating housing market. The rate cuts already imposed this year heighten risks around lending standards in terms of credit growth and loan quality. Housing markets in Sydney and Melbourne remain overheated.

6 The Week Ahead US Tuesday 19th May Forecast Last 8:30 Housing Starts (Apr) 1,020K 926K Permits 1,060K 1,042K Thursday 21st May Forecast Last 8:30 Initial Jobless Claims (May 16) 270K 264K 10:00 Beneficiaries (May 9) Existing Home Sales (Apr) Leading Indicators (Apr) 2.27M 5.25M 0.4% 2.22M 5.19M Philadelphia Business Survey (May) 6.0% 7.5% Friday 22nd May Forecast Last 8:30 Consumer Price Index (Apr) 0.1% Ex Food and Energy Source: Citi Research and Bloomberg UK Tuesday 19th May Forecast Last Consumer Prices (Apr) 0.3% MM, -0.1% YY 0.3% MM, MM, 0.0% YY Ex Food, Drink, Tobacco, Energy (Apr) Retail Prices (Apr) RPIX Ex Mortgages (Apr) Producer Input Prices (Apr) Producer Output Prices (Apr) Output Prices Ex Tax (Apr) Ex Food, Drink, Tobacco, Energy (Apr) 0.8% YY 0.5% MM, 1.0% YY 0.5% MM, 1.0% YY 1.0% MM, - 1 YY 0.0% MM, -1.7% YY 0.0% MM, -1.4% YY 0.0% MM, 0.1% YY MM, 1.0% YY MM, 0.9% YY MM, 0.9% YY 0.3% MM, -13.0% YY MM, -1.7% YY 0.3% MM, -1.4% YY 0.0% MM, 0.1% YY Thursday 21 st May Forecast Last Retail Sales Volumes (Apr) CBI Industrial Trends Survey (May) Monthly Output Expectations Net Bal. (May) Monthly Order Books Net Balance (May) Monthly Selling Prices Net Balance (May) 1.0% MM, 4.4% YY 22% 2% -1% Prior: -0.5% MM, 4.2% YY Friday 22 nd May Forecast Last Public Sector Net Borrowing (Apr) 8.3bn deficit, 8.3 billion deficit 9.3bn deficit, 9.3 billion deficit (Ex Public Sector Banks) Service Sector Output (Mar) fiscal year to date 0.4% MM, 3.0% YY fiscal year to date 0.3% MM, 3.2% YY 16% 1% -3% Source: Citi Research EUR Monday 18th May Forecast Last 08:15 09:00 Switzerland: Retail Sales, Mar Italy: Trade Balance, Mar Tuesday 19 May Forecast Last 07:00 EU-27: New Car Registrations, Apr 09:30 UK: Consumer Prices, Apr 0.3% MM, -0.1% YY MM, 0.0% YY CPI Ex Food, Drink, Tobacco, Energy, Apr 0.3% MM, 0.8% YY MM, 1.0% YY Retail Prices, Apr 0.5% MM, 1.0% YY MM, 0.9% YY RPIX Ex Mortgages, Apr 0.5% MM, 1.0% YY MM, 0.9% YY 09:30 UK: Producer Input Prices, Apr 1.0% MM, -1 YY 0.3% MM, -13.0% YY 09:30 UK: Producer Output Prices, Apr 0.0% MM, -1.7% YY MM, -1.7% YY Excluding Tax, Apr 0.0% MM, -1.4% YY 0.3% MM, -1.4% YY Ex Food, Drink, Tobacco, Energy, Apr 0.0% MM, 0.1% YY 0.0% MM, 0.1% YY 10:00 Germany: ZEW Current Situation, May ZEW Economic Sentiment, May :00 Euro Area: HICP, Apr Final 1.1% MM, -0.1% YY 0.6% MM, -0.3% YY 10:00 Euro Area: Trade Balance, Apr Wednesday 20 May Forecast Last 07:00 Germany: Producer Prices, Apr 08:30 Sweden: LFS Unemployment Rate, Apr 7.6% NSA, 7.3% SA 8.0% NSA, 7.6% SA

7 09:00 Norway: Mainland GDP, 1Q 0.5% QQ 0.5% QQ 09:30 UK: MPC Minutes of 8 May Meeting 09:30 UK: BoE Agents Summary of Business Conditions, May 10:00 Euro Area: Construction Output, Mar Spain: Trade Balance, Mar Thursday 21 May Forecast Last 08:30 Netherlands: Unemployment, Apr 09:00 Italy: Contractual Wages, Apr 09:00 Euro Area: Manufacturing PMI, May Flash Services PMI, May Flash Composite PMI, May Flash :00 Euro Area: Monthly Balance of Payments (ECB), Mar 09:30 UK: Retail Sales Volumes, Apr 1.0% MM, 4.4% YY -0.5% MM, 4.2% YY 09:30 UK: Migration Statistics 10:00 Italy: Current Account Balance, Mar 11:00 UK: CBI Industrial Trends Survey Output Expectations, May +22% +16% CBI Order Books, May +2% +1% CBI Selling Prices, May -1% -3% 11:00 Ireland: Quarterly National Household Survey Unemployment Rate, 1Q 12:30 Euro Area: ECB Account of Monetary Policy Meeting on Apr 15 15:00 Euro Area: Consumer Confidence, May Flash Friday 22 May Forecast Last 07:00 Germany: GDP Details, 1Q 0.3% QQ, 1.2% YY 0.7% QQ, 1.5% YY 07:45 France: Manufacturing Confidence, May Own-Company Production Outlook, May :30 Netherlands: Consumer Confidence, May 08:30 Netherlands: Consumer Spending, Mar 09:00 Germany: ifo Business Climate, May :00 Italy: Industrial Orders, Mar 09:30 UK: Public Sector Net Borrowing, ex Public Sector Banks, Apr 8.3 Billion Deficit Year Ago: 9.3 Billion Deficit 10:00 Italy: Retail Sales, Mar 14:00 Belgium: Consumer Confidence, May Sources: National statistical offices, central banks and Citi Research. JPY Monday 18th May Forecast Last 8:50 Tertiary Industry Activity Index (Mar) 0.5% MoM; -1.2% YoY 0.3% MoM; -0.4% YoY Wednesday 20th May Forecast Last 8:50 Real GDP 1st Preliminary Estimate (Q1) 0.4% SA QoQ; 1.4% SAAR 0.4% SA QoQ; 1.5% SAAR Thursday 21st May Forecast Last 8:30 All Industry Activity Index (Mar) 0.1% MoM; -1.2% YoY - MoM; -1.3% YoY Sources: Ministry of Economy, Trade and Industry, Ministry of Land, Infrastructure, Transport and Tourism, Ministry of Internal Affairs and Communications, Ministry of Health, Labor and Welfare, Citi Research. AUD Tuesday 19 th May Forecast Last 11:30 RBA Board minutes 1.0% 1.2% Source: Citi Research