Peter Boockvar, Chief Market Analyst at Lindsey Group, on US Economy and Dollar
Although the Federal Reserve has viewed the most recent economic data as unreliable, analysts remain optimistic and fore-cast the Fed to raise its benchmark interest rate in June. Do you share this point of view or not and why?
The US economy has slowdown a lot in the Q4 of 2015 and in the Q1 of 2016, and I do not expect much rebound in the Q2. It is unlikely that the Fed will be raising rates in June, and moreover, I believe the Fed will not be raising rates at all this year.
The degree of integration of the United Stated into the world economy has grown significantly over the past few years. Ac-cording to the latest data, the IMF has recently revised downwards its global growth outlook to 3.2%, following January's 3.4% forecast. To your mind, will the US economy slip into a recession in 2016 if the rest of the world fails to perform suc-cessfully?
I believe the question of whether it will happen or not actually is going to be the markets. We have a very asset price depending global economy, and we surely have another price depending US economy. That is the bear market which I suppose began in the middle of last year intensifies, and this year the impact on consumer spending would be enough to tap the US economy into recession. Either way the US economy is barely growing, as nominal GDP is sparely above zero, and whether it is a tech-nical recession or not may not indicate that much difference. In terms of earnings, US earnings are already in a recession. The Q1’s earnings which are going to come out in earnest over the next couple weeks are expected to be down year-on-year for the fourth straight quarter.
What factors will influence the performance of the Greenback through the rest of the year?
I believe it may solely be what the Fed does and in some rights the Fed is not raising rates again. Then I assume the strong Dol-lar rally, which pretty much ended in March of last year, is over and it will give certainly a respect to other emerging markets that have been under a lot of pressure now. The Fed, the Bank of Japan and the European Central Bank certainly do not want their currencies’ rally, but if the Fed is not raising rates again there are very little keys to make on a bull side for the US Dollar.
What are your forecasts for USD/CAD, EUR/USD and USD/JPY by the end of 2016?
I suppose that the bear market in commodities is over. Therefore, I like the Canadian Dollar against the US Dollar. We are just talking about three currencies that are highly manipulated by their central banks and what one does against another is that those three central banks are racing to the bottom. Who is going to win, I am not exactly sure, because they all are doing a good job on their currency, and I understand the argument that negative interest rates at least in the Euro zone and in Japan is negative for their currencies.
However, the Fed is not going to embark on a multi-rate hike cycle, which is a headwind for the Dollar. My bottom line to the question on currencies is that the real currency that wins in the entire scenario is gold. That is the currency that I will be most focused on.
This overview can be used only for informational purposes. Dukascopy SA is not responsible for any losses arising from any investment based on any recommendation, forecast or other information herein contained.
Recommended Content
Editors’ Picks
EUR/USD stays below 1.0800 after upbeat US data
EUR/USD stays under bearish pressure and trades slightly below 1.0800 in the American session on Thursday. The data from the US showed that the real GDP growth for the fourth quarter got revised higher to 3.4% from 3.2%, supporting the USD and weighing on the pair.
GBP/USD stays in daily range above 1.2600
GBP/USD fluctuates in a narrow channel above 1.2600 on Thursday. The better-than-expected Initial Jobless Claims data from the US and the upward revision to the Q4 GDP growth helps the USD stay resilient against its rivals and limits the pair's upside.
Gold clings to strong daily gains above $2,200
Gold retreats from daily highs but holds comfortably above $2,200 in the American session on Friday. The benchmark 10-year US Treasury bond yield stays above 4.2% after upbeat US data and makes it difficult for XAU/USD to preserve its bullish momentum.
XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC
XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase.
Portfolio rebalancing and reflation trades emerge into Q2
Yesterday’s price action pointed at a possible end-of-quarter portfolio rebalancing as the session saw the laggards of the quarter like Apple and Tesla gain, and the stars like Microsoft and Nvidia retreat.