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2 Apr 2014
Our three core calls - HSBC
FXStreet (Guatemala) - David Bloom, Global Head of FX Strategy & team note that the first quarter is now behind us and aid the question is what does the rest of the year herald?
Key Quotes:
"1. Buy the fragile five - For us the trade to have on now is to be long EM, and in particular the "fragile five". One feature of the market that is particularly striking is the fall in volatility which supports the long EM carry trade".
"2. EUR will come under pressure -This is an important view given the size and the scope of the euro as a currency. Here we feel the differences between the Fed and the ECB will define the currency performance. The Eurozone is coming very close to deflation and some type of QE policy is just a matter of time, whilst the Fed is starting to talk about rate hikes".
"3. Cable will fall -This is perhaps our most controversial forecast and the price action is testing our resolve. Unlike our EM call we do NOT see a continuation pattern. Here we fear the UK balance of payments position will become problematic for the currency as the year progresses".
Key Quotes:
"1. Buy the fragile five - For us the trade to have on now is to be long EM, and in particular the "fragile five". One feature of the market that is particularly striking is the fall in volatility which supports the long EM carry trade".
"2. EUR will come under pressure -This is an important view given the size and the scope of the euro as a currency. Here we feel the differences between the Fed and the ECB will define the currency performance. The Eurozone is coming very close to deflation and some type of QE policy is just a matter of time, whilst the Fed is starting to talk about rate hikes".
"3. Cable will fall -This is perhaps our most controversial forecast and the price action is testing our resolve. Unlike our EM call we do NOT see a continuation pattern. Here we fear the UK balance of payments position will become problematic for the currency as the year progresses".