ETF Securities Research Blog

If Bank of England doesn’t hike rates in 2017, then when?

One year on from the last rate cut, the Bank of England has kept rates on hold, with the MPC voting 6-2 in favour of the decision (roughly the same as last month). Although policy remains unchanged, GBP should remain supported by what is expected to be a tighter policy path in 20-17/2018. Indeed, Governor Carney indicated that policy may need to be tightened at a faster rate than the market is currently pricing. Read more…

Is the Canadian Dollar signalling an oil price bottom?

The Bank of Canada (BOC) raised rates for the first time in seven years this week, the second major central bank to do so after the Federal Reserve. The BOC indicated that its economy ‘is approaching full capacity’. As a result, the Canadian Dollar, the so-called Loonie, jumped to the highest level against the US Dollar in 13 months. A rising CAD could be signalling a bottom for oil prices. Read more…

The problem with cryptocurrencies

Cryptocurrencies are very much an emerging asset class, and the technology underpinning it is steadily developing. However, we believe there are intensifying issues regarding regulatory scrutiny, liquidity, trade execution/confirmation time, scalability, trust in the money creation process and the fundamentals that drive the currencies.

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No bounce for the Aussie Dollar

Although the Australian economy set a record of not having a recession in 104 quarters – since 1992 – growth in Q1 2017 was the weakest in over seven years. With the Reserve Bank of Australia (RBA) remaining firmly in an accommodative policy stance, the downside risks for the Australian Dollar (AUD) are mounting in the near term. Read more…

From the horse’s mouth: Fed rate hike likely to prompt further USD weakness

The market has been fully pricing in a rate hike from the Federal Open Markets Committee (FOMC) for over a month – since mid-May, the US Dollar (USD) has fallen nearly 3%. Recent Fed speakers prior to the ‘blackout’ indicate that the view is relatively pragmatic and balanced. However, the USD could still weaken further even if the Fed follows through on market expectations for a rate rise Read more…

ECB communication – a masterclass in subtle communication

Today’s European Central Bank (ECB) press conference was an exercise in subterfuge: a subtle communication of tapering without actually discussing the concept. Draghi is trying to throw the market off the ‘scent’ by noting “there were 2 observations on policy normalisation (aka tapering) but no discussions on it”. As a result, we expect the Euro to move lower in the near-term until the need for tighter monetary policy for the Eurozone becomes a more strongly voiced position. Read more…

GBP to gain after the UK election

We expect that the British Pound will gain after a period of consolidation around current levels ahead of the UK election next week. The latest polling indicates that Prime Minister May’s lead has declined, prompting a modest pullback in the local currency. We expect that although GBP could soften further in the coming week, as the Conservative party’s lead see-saws, but believe it will stay above key support of 200-dma, which is currently 1.2595.

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Euro to benefit from the US Dollar downside risk.

Fading political uncertainty in Europe alongside the improving growth profile is bolstering the Euro. Meanwhile, the US Dollar has failed to benefit in any significant way, despite the market pricing in a rate hike in June by the Fed. We expect that there is a downside risk for the US Dollar if the Fed disappoint in June, especially in view of FX market positioning. Read more…