Making the Dollar Great Again
As of December 2016, the Federal Reserve forecast 3 interest rate hikes of 25bps each in the US, combined with the expected fiscal stimulus from President-elect Trump’s government has led to USD appreciation.
Year-to-date Sterling has been relatively resilient in the face of recent USD strength. This can be attributed to the London High Courts’ recent ruling that triggering Article 50 would require a parliamentary vote. While this may delay Brexit, it is unlikely to prevent it, in Citi’s view.
Emerging Market currencies have depreciated against the USD, following the US Presidential election result. Asian currencies would be vulnerable to any rise in trade protectionism. While China is currently running the largest trade account surplus with the US globally, China has sufficient reserves and a relatively closed capital account to be in a position to smooth any exchange rate moves. Over the next 12 months, we expect the RMB to weaken by 4.2% from current levels.
- Over the next 12 months, USD may be 6-7% higher vs G19 and 3% higher vs EM currencies
- From current levels the RMB may weaken by 4.2% from current levels
- Sterling may still be vulnerable to further gains in the USD
- Increased currency and rate volatility is potentially negative for commodity (AUD,NZD and CAD) and Asia EM currencies
Citi Outlook 2017: Reflation, Rotation & Risks
Last year’s UK referendum and US presidential election were surprising and in fact, little short of unforgettable. The results now behind us, what lies on the investment horizon for 2017?
On 2 February in London, our specialists will present Citi’s Outlook for the year ahead. We’ll also be hearing from key fund house partners, who’ll discuss the risks and prospects that lie in store for your investments.
Please register for the event via your Relationship Manager. If you are interested in becoming a Citigold client and would like to register your interest for the event, please call 0207 500 1992 (9AM – 5PM Mon-Fri).
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