• We add New York to our RGI, reflecting rising Renminbi payment flows and CNH FX turnover
• New York enjoys time-zone advantage, massive trade with China, and rising investor interest in the RMB
• We summarise the latest Renminbi developments in...
• Spare capacity is key for BoE policy makers: by Q4-2014, less slack in the labour market should trigger concerns over the medium-term inflation outlook
• We expect a measured hiking path equivalent to 25bps each quarter from Q1-2015 through 2016
• The BoJ surprised the market by expanding its current loan-support programme
• We do not think the BoJ is likely to roll out any fresh easing in the near term
• Reform implementation remains critical for Japan’s revival...
• Top 3 data/events
• Malaysia – CPI inflation likely edged up further in January
• UK – BoE minutes to echo Inflation Report as unemployment falls to 7%
• South Africa – January CPI inflation a key focus
• Market focus
• Credit growth was...
• We investigate volatility slopes for EUR-USD, GBP-USD, EUR-JPY and USD-JPY
• We find similar statistical profiles and mean-reverting properties across currency pairs
• We find that on average the volatility slopes considered for these pairs mean...
The BoE drops its unemployment threshold and is now focusing on spare capacity and productivity
• Economic slack could be eliminated by early 2015, with unemployment reaching equilibrium by late 2014
• We revise up our 2014-15 GDP forecast, cut 20...
• FM is likely to meet the FY14 fiscal deficit target of 4.8% of GDP, project a FY15 deficit at 4.2%
• Spending cuts, higher non-tax revenues will allow adherence to the fiscal consolidation plan
• Gross borrowing likely to be c.INR 5.8-6.0tn; w...
Market turmoil has underpinned the USD and the upward slope in USD-CNY NDFs
• The USD-CNY 12M outright in the NDFs is some way above the USD in the 12M deliverable forwards
• We expect CNY appreciation to be extended in 2014; there may be scope f...
The approved energy reform is expected to have a significant impact on long-term growth
• In the short term, growth remains soft; we revise lower our 2014 GDP forecast to 3.0% from 3.8% prior
• Moderate growth and contained core inflation will l...
• Our Indonesian clients are slightly more optimistic this year on business prospects
• Our survey results suggest that sustaining revenue growth remains the key challenge
• Indonesian clients are bearish on their local currency vs. USD in 2014,...
• Fewer corporates expect growth to accelerate in 2014 from the pace seen in 2013
• Sustaining revenue growth is corporates’ main concern, far outweighing worries over rising costs
• Corporates are bearish on the SGD vs. USD; looking to partly hed...
Time may be running short for EUR-USD to fall as underlying fundamentals grow increasingly balanced
• We remain committed USD bulls, however, so we still expect a EUR-USD move lower in H1
• Leveraged funds: We recommend buying 3M 25/10-delta EUR-U...
• We expect GDP growth to rebound to 3.9% y/y in 2014 from 2.2% in 2013
• We expect inflation to rise to 1.7% y/y in 2014 from 0.8% in 2013
• Policy makers are likely to keep the benchmark rate on hold in March, resume hikes in June 2014
• We rai...
• The optimists still outnumber the pessimists in Malaysia, but are fewer than in 2013
• ‘Managing costs’ is the number one challenge, according to our survey
• Malaysian clients are bearish on the MYR and plan to partially hedge 2014 FX exposure...
Our SC IMM positioning heatmap suggests AUD may see a major short-term rally
• Leveraged net shorts in the AUD vs. the USD, EUR, GBP and NZD reach sample extremes
• Leveraged funds should buy 1M EUR-AUD, GBP-AUD put spreads...
• The seasonal upturn in Hong Kong FX options is having a bigger impact on the CNH than on the HKD
• The USD-CNH implied volatility decline comes amid rising realised volatility and policy uncertainty
• Leveraged accounts should buy USD-CNH option...
Top 3 data/events
• South Korea – Imports continue to grow as the economy recovers
• Thailand – Take profit on receive THB 3Y IRS
• USD-CAD – We are raising the stop-loss on our long position
• China’s official manufacturing PMI ...
PBoC ‘study guide’ does not signal near-term shift in FX policy
• Near-term global event risk is building, even though late-year seasonals tend to favour the CNY
• Leveraged investors should take profit on USD short in the 12M USD-CNY NDFs...
We think EUR-USD spot is likely to remain confined to familiar ranges into early next year
• The macro drivers behind EUR-USD have attained a near-term equilibrium; major risks are now priced in
• Even with implied vols at their current subdued le...
Strong NFP will put short-term pressure on bond-driven currencies such as the IDR
• Given upside risks to UST yields near-term, USD-IDR NDF points are likely to edge higher near-term
• Fundamentally, we like this trade and will look to re-enter a...
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This report provides an economic outlook for more than 60 economies worldwide and investment implications for commodities, credit, equities, FX and interest rates markets in 2014. We expect a better 2014, with world economic growth picking up and inflation staying benign. Global growth should increase to 3.5% in 2014 from 2.7% in 2013, helped by improvements in economic activity in the US and Europe. A pick-up in growth in the West is good news for the rest of the world, and we expect emerging economies’ growth to outpace G7 growth by almost 4 percentage points.
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