2016 to be filled with just as much excitement as 2015
A brief look back at 2015 shows a few momentous events we are unlikely to see again in a hurry. Last January the Swiss removed their currency peg to the Euro, sending rates into a tailspin. In May, the UK surprised itself by voting in a majority government causing Sterling to surge across the board. In August the US blamed the Chinese for not raising interest rates, putting brown trousers back in vogue for the first time since 1979 and causing investors to flock to the Euro. And the US finally raised interest rates in December, normalising monetary policy after a ten year wait.
New year, new stronger Dollar. The Greenback starts the year with fresh highs against its rivals suggesting a possible strong year. It is early to make any bold assumptions as trading volume over the Christmas period would have been reduced, which could have allowed the Dollar to rally. However, the outlook is strong for the US Dollar as the US economy is now in hiking mode and looking to kick on in 2016.
EURUSD has a bearish outlook this month, following a bullish December. The pair is testing new lows of 1.08 as Dollar strength weighs on the pair. On the flip side, the Euro has continued to strengthen against Sterling since November – it is currently eyeing 1.34 levels.
Major events to look out for this year are: sanctions on Iran finally being lifted and oil production to rise all year; a second US Rate Hike; potentially a UK Rate Hike, probably delayed due to a Brexit referendum; whether the Saudi’s maintain a currency peg with the US Dollar. Also to consider are anything Mario Draghi does as he tries to lift the Eurozone out of the mire, and the Chinese economy in general.
And lastly a quote from J.K. Galbraith – “Economists don’t forecast because they know, they forecast because they’re asked”.
Data to watch today: UK Manufacturing PMI report and the US Manufacturing ISM levels.