Risk head-fake
|On the surface, risk is building, yet underneath, volatility continues to compress. The VIX volatility index at 12.33 is at levels not seen since January. Financial markets are less concerned about geopolitical hype and more focused on fundamentals. Economic slowdown in Asia and Europe is not alarming, while central banks’ normalisations remains gradual. Equity valuations outside the US are at manageable levels. While protectionism remains a risk, Asia’s internal trade keep the region supported. Growth in the developing East Asia and Pacific regional is expected to reach 6.4% in 2018; China is outpacing estimates, tracking toward 6.9%.
We are bearish USD (bullish INR, THB and IDR), yet uncertain how the massive debt sale will affect emerging markets’ capital outflows. This week a US rate hike of 0.25% is universally expected. There is risk of four rate hikes in 2018, up from currently expected three. Four hikes would give the USD a minor, short-lived boost.
Stay on top of the markets with Swissquote’s News & Analysis
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.