FXstreet.com (Barcelona) - Emmanuel Ng of OCBC Bank´s Treasury
research and Strategy team has taken a look at the FX markets
prospects for the year ahead.
Starting with the FX Sentiment Index (FXSI), he expects that
markets will remain under an overhang from the US fiscal cliff at
the onset of the year, with signs of underlying unease with respect
to the US related risk indicators into the end of 2012. However,
pending headline flow out of the US, he expects markets to start
the year in a risk on environment.
When looking at global manufacturing activity he notes that the
global recovery looks nascent at best, noting that global central
banks, bar none, renewed their dovishness into 2012 year end.
However, he does see some light at the end of the tunnel, noting
slightly unsteady gait analysis, but the global outlook is expected
to continue to find its footing in 2013.
He sees nascent support for overall commodity prices from global
recovery prospects but a high conviction move may remain waiting in
the winds pending further evidence. Looking at FX volatility, he
believes that the substantial monetary and contingency backstop
provided by global authorities is likely to continue to contain
tail risks, encouraging yield seeking behaviour.
Focusing on the Euro, Ng writes "Any EUR gains are expected to be
measured given the inherent structural impediments (e.g., fiscal
constraints, monetary accommodation)." Looking at Yen, he continues
to explain, "Macro realities and the intent to aggressively loosen
monetary conditions further bode ill for the yen. As such, the
yen's broad valuation may continue to mean revert." Moving to AUD,
he notes that "A slowing Chinese economy and moderating Australia
terms of trade have been keeping the AUD constrained. For 2013,
look towards further confirmation of the global (China) economy for