Yann Quelenn
Swissquote Bank Ltd
Fed members look concerned by the level of equities. San Francisco Fed President John Williams declared recently that the stock market is “running on fumes” while Janet Yellen said that current stock valuation levels are “rich”. Both declarations have been made at separate moments and it is clear the Fed underpinned stocks overvaluation.
Our overview of the US economy is bearish and markets expect today’s Q1 GDP to be released at 1.2% q/q. We believe that fundamentals are still soft and we consider the US recovery to be overestimated at the moment.
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On top of that, the IMF in a report has slashed its GDP forecast for year-end by removing the effect of President Trump’s fiscal stimulus. Indeed, it looks more and more uncertain that this fiscal plan will ever be implemented at this point. The IMF forecast for US GDP is now 2.1% from 2.3% in April. As a result the Trump target of 3% growth looks less and less unattainable.
Currency-wise, there is room for further weakness for the greenback. The Eurodollar pair, which has strengthened out of Draghi’s comments, should continue heading higher on markets pricing back in US economic difficulties.
This report has been prepared by Swissquote Bank Ltd and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Swissquote Bank Ltd personnel at any given time. Swissquote Bank Ltd is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.
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