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The dollar may rise to 100 and then fall back to 90. Can the “early disaster” emerging asset assets rebound?

January 11, 2019 17:11
source: Huitong Network

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In 2019, the Fed's attitude may be much more than the hawks expected by the market. This means that there is still room for the US dollar index to rise in 2019, and even the 100-integer mark will be tested before turning to the 90 mark. And in an emerging market country that is "deeply hot", can it breathe in 2019? If possible, these national assets are expected to have a big rebound.

Although the market is currently consistently bearish on the US dollar 2019 market, the Fed's attitude may be much more than the hawks expected by the market. This means that there is still room for the US dollar index to rise in 2019, and even the 100-integer mark will be tested. Until the weak economic indicators come out, the Fed will really turn, then the dollar will weaken, and the bottom may need to pay attention to the 90 mark.

In recent years, under the tide of the Fed’s interest rate hike, is it in an emerging market country with “deep waters”, can it breathe in 2019? If possible, these national assets are expected to have a big rebound, after all, have fallen too much.

The following is the detailed analysis content of Xicheng Group

In 2018, the foreign exchange market experienced a very unsettled year. The Fed completed four interest rate hikes. The global market suffered a “dollar shortage”. Emerging market countries once saw a “three-kill” bond. The US dollar, which was consistently sung by investment banks, became one of the key factors in the global market this year, with an increase of about 5% during the year. The euro, the Canadian dollar, the Australian dollar, etc., which are highly anticipated, are not beautiful.currencyBut it is very disappointing. However, the institutions have a little prediction that the pound will continue to be suppressed by the uncertainty of Brexit.

In 2018, as the US dollar index continued to strengthen, some emerging market countries' currencies experienced a large depreciation, and the cost of repaying US dollar debt soared, which not only aggravated the economic difficulties of these countries, but also led to the return of funds to the United States. The rapid tightening of the liquidity of the US dollar led to the emergence of a three-person killing of “shares and debts” in these countries.

  The people’s exchange rate experienced a “bad” annual depreciation of over 7%

As the Fed continued to raise interest rates, the US dollar index continued to be strong. The RMB exchange rate continued to depreciate in 2018. The offshore RMB exchange rate once depreciated and fell below the 6.98 mark, which once caused the market to worry about the RMB exchange rate is about to break. In this context, August 3, the peoplebankIn the forward foreign exchange sales business, the foreign exchange risk reserve ratio was adjusted from 0 to 20%; on August 24, the “counter-cyclic factor” was restarted; on November 7, the central bank issued the first 20 billion yuan in Hong Kong through the Hong Kong Monetary Authority. Tickets to regulate the liquidity of the RMB in overseas markets and maintain the RMB exchange rate. In November, the RMB exchange rate trend stabilized, and the exchange rate in December turned down. On December 28, the foreign exchange market ushered in the closing day. The total depreciation of the onshore RMB was 3,723 basis points, a decrease of 5.72%.

In 2019, as the US tax cuts will gradually disappear, coupled with the high US government debt and the recent impact of the US stock market into the technology bear market, the dollar may fall back and end the strong dollar cycle that began in 2012. Affected by this, the RMB exchange rate is expected to stabilize and rebound. If there is any unfavorable news, the RMB exchange rate will still have a great depreciation pressure.

  Trump and the Federal Reserve’s "love and hate"

Since the beginning of the campaign, Trump has always appeared in the face of the world in the face of "conservatism" in the economic field. He strongly criticized globalization and believed that this was the chief culprit of the large number of blue-collar classes in the United States. And threatened to reverse this situation. After successfully winning the White House, Trump also made a series of actions, and indeed practiced this proposition and commitment. Under his leadership, the United States set off a trend of counter-globalization, trade protection is prevalent, and there is a global economic order. Suffered a serious threat.

Trump squirted 12 times, but the Fed and the two raised interest rates, breaking the 24-year record:

After the Federal Reserve was sprayed by Trump for 12 times, it still steadfastly raised interest rates, raising interest rates by 25 basis points, which is quite powerful. They mainly consider quantitative easing for so many years, and now the pace of interest rate hikes can not be chaotic, so they still have to be willing to add Canada, the dollar continues to strengthen, and a burst of emerging countries, Trump is now worried about the next one is not doing well. It’s the United States itself. After all, his policy is to stimulate the economy. Let’s not add it. The tax cut is better. However, the Fed still “does not listen to me and does not listen”. But the US stocks have fallen into dogs. This is the first time since 1994 that the stock market has risen sharply when the stock market crashed, setting a new record, but it also carries a big danger. The market is worried that this will make the market that is already lacking in liquidity continue to deteriorate. .

Everyone may be surprised that God Trump can't directly order the Fed, which is related to the establishment and operation of the Fed: the Fed chairman has a 14-year term and operates independently, without having to listen to the president with a short term, so it can So capricious~ Now that Powell has not taken office for a long time, 13 years after the end of his term, Trump uses the old routine - public speech + hairTwitterThere was no right to dismiss the bombings, and there was no right to dismiss. Only the Fed’s chairman resigned, and no president expelled the Fed’s chairman.

However, the president and the Fed chairman have a wide gap between their terms of office. They are also destined to see the president’s main ambiguity. The Fed will look at poetry and distance, and there will be more opportunities for trussing on both sides.

After a strong rise so far in 2018, the US dollar's trend of tightening monetary policy has slowed down, coupled with the return of risk appetite, the dollar trend will fall back in 2019. The US dollar against the six major currencies – the US dollar index is expected to fall more than 5% from its current level by the end of 2019, staying near the 91.90 level. This means that the dollar will erase all gains in 2018 by 2019.

At present, although monetary policy differences are driving the US economy to outperform other OECD economies, this does not fully explain the soaring dollar. On the other hand, the return of financial market risk aversion is clearly good for the dollar, especially in recent months. But as the US dollar performs better this year than other “safe haven” currencies such as the Japanese yen and the Swiss franc, there are certainly other factors at work. In other words, although the dollar is currently at a high level, the possibility of a major correction in 2019 is not ruled out, which is amplified by the reversal of the non-commercial net long position.

  Meilu’s “death” is still foggy

In 2018, the development of Brexit was the main driver of the pound. From the beginning of the year to the end of the year, media coverage of the potential leadership of the British Conservative Party and the possibility of the second Brexit referendum continued throughout the year of 2018. December 12, Teresa? With a vote of 200 to 117, Mei passed the vote of no confidence in the party. However, the Brexit solution is still not close to the signs of the release, the pound against the US dollar exchange rate also fell from the 1.40 mark to the 1.24 mark.

On December 12, 2018, local time, the British Conservative Party announced the launch of a vote of no confidence against Prime Minister Teresa May. The "backyard fire" is believed to be related to Mei's ineffectiveness in promoting the "Brexit" agreement. The Conservative Party said that it no longer believes that the Prime Minister can complete the "Brexit" agreement. The result of the vote is that Mei Lan won the majority vote with 200:117, and Conservative Party members will no longer be able to launch a vote of no confidence in one year.

At present, the “guarantee clause” related to the Irish border issue is the most controversial content of the “Brexit” agreement. The exact time for the next vote of the parliament depends on how long the new negotiations with the EU last. The final deadline is January 21 next year. The UK will officially withdraw from the EU on March 29, 2019. However, since the British parliament parties have not yet supported the agreement reached between Teresa May and the EU leaders, the road to soft Brexit remains fierce. In 2019, the pound will be The dangers are met in a difficult situation.

For the 2019 sterling trend, the Brexit progress will remain a major factor. In addition, factors such as the UK economic recovery and the Bank of England’s monetary policy will also drive the pound. It is worth noting that the "Brexit" agreement still needs to be approved by the British Parliament and other EU member states before it can take effect. If the British Parliament passes the Brexit Agreement, then the United Kingdom will embark on the path of orderly Brexit. This will be extremely beneficial for the 2019 sterling trend.

Regardless of the final outcome of Brexit, its uncertainty over the UK economy will diminish over time. Once the British economy continues to recover, the Bank of England has a hawkish stance, and the Fed is likely to be nearing the end of the interest rate hike cycle. The pound may still be boosted later next year. With the resolution of the Brexit issue, the return of the pound to 1.30 is by no means an idiotic dream.

  The Italian budget temporarily subsides the euro’s doomed to escape the “Brexit” robbery

At the beginning of 2018, German political development was improving, boosting the trend of the euro. Specifically,MerckThe German Christian Democratic Union (CDU), which is affiliated with it, has increased the possibility of cooperation with the Bavarian Christian Social Union (CSU) and the German Social Democratic Party (SPD).

However, in the Italian parliamentary elections in March, the anti-establishment party won a large number of seats, increasing the uncertainty of EU politics. Since then, the difficulties of the Italian cabinet and the vote of no confidence in Spain have dragged down the euro.

The Italian government submitted a draft of the 2019 budget to the EU in October, accounting for 2019 fiscal deficits.GDPThe ratio is set at 2.4%, approaching the EU's 3% ceiling. The EU strongly urges Italy to cut the ratio, but Italy is tough and refuses to compromise on the deficit. The European Commission then rejected the budget submitted by Italy in November and will consider launching a disciplinary procedure to impose relevant economic sanctions on Italy. This move caused a sharp increase in market panic, and both the pound and the euro fell sharply.

After a close negotiation with the EU, Italy’s attitude has softened. On December 19, Conte said that the government will account for 2019 fiscal deficits without adjusting the budget content, the scope of beneficiaries and the effective date of the policy.GDPThe ratio of (GDP) was lowered from 2.4% to 2.04%, and the euro pound was heard. However, although the "fire" of Italy has been temporarily eliminated, the euro will still be unable to cross the "Brexit" robbery next year.

Europe in 2018 is disappointing. Although the lack of economic growth is blamed on a series of endless “one-off factors”, it is difficult for economic activity to rebound significantly next year. Whether the European Central Bank can actually start raising interest rates is still a big problem, and this is a completed, extremely gradualist approach that may not really boost the euro to a large extent.

The outlook for EUR/USD is not very optimistic. Even if it is indeed expected that the US dollar will fall, it is expected that the EUR/USD is still difficult to break through the important 1.20 mark. Because the European Central Bank (ECB) will hardly raise interest rates. In addition, the European Parliament elections in May next year will also be the focus, and the euro zone politics faces greater uncertainty.

★★★ The Fed’s wave of interest rate hikes and the booming emerging markets will us be able to breathe in 2019? ★★★

  The peso has plummeted more than 50% this year. Argentina announced a tightening policy to save itself.

Since the beginning of this year, the Argentine peso has plunged 53.9%, becoming the worst performing currency in emerging markets. The plunging of the Argentine peso is mainly due to the increase in imported inflation and the continued outflow of capital, thus exacerbating the expectation of exchange rate depreciation.

In order to save the economy and prevent the peso from continuing to depreciate, Argentine President Makri issued a 30-minute televised speech on September 3, announcing new austerity measures. He said that stopping excess spending and achieving a balanced budget is the only way to end the financial turmoil in Argentina for decades. However, the statement still seems to have failed to meet the expectations of the international market. After the announcement, the Argentine peso fell again.

  Turkish lira fell more than 40%, China's purchase of luxury goods store "on the basket to buy"

The Turkish lira fell more than 40% against the US dollar this year, as a Christian pastor in the United States was detained in Turkey for terrorism charges, causing the relationship between Turkey and the United States to drop to a freezing point, causing the lira to sell faster and sharply.

As the lira plunged, Turkey also became a shopping paradise for luxury goods. In the luxury goods stores of major brands in Istanbul, consumers who come to shop have long queues, among which there are many Chinese buyers who are sensitive to the exchange rate.

  Venezuelan currency smashed into "paper" children playing in banknotes

In 2018, prices in Venezuela have risen 460 times. According to internationalMonetary FundThe organization's IMF forecasts that Venezuela's inflation rate will reach 1000000% (10,000 times) by the end of the year, which will surpass the Weimar Republic in 1923, approaching the level of Zimbabwe 10 years ago.foreign exchange reservesThe sharp decline in the scale, the severe shrinking of oil production capacity, the high welfare policy, and the US and European financial sanctions directly led to the large depreciation of the Venezuelan currency.

  South Africa fell into the recession for the first time in nine years. Rand fell more than 20% during the year.

Affected by the land reform and the spread of emerging market crises, South African Rand fell more than 20% during the year. The South African economy has also shrunk for two consecutive quarters, marking its entry into a technical recession for the first time in nine years.

In 2018, only two major currencies rose, the Japanese Mexican peso became a "lone survivor"

In 2018, with the Brexit and the unstable political situation in Europe, the market risk aversion continued to rise, and the safe-haven currency, the yen, also benefited. At the beginning of the year, the Bank of Japan policy guidance hawkish change also boosted the appreciation of the yen. But later, this wave of gains was erased. This is mainly due to the policy deviation of the Bank of Japan and the rise in US Treasury yields, which helped push the dollar higher.

Bank of Japan Governor Haruhiko Kuroda said that the Bank of Japan does not intend to maintain it forever.interest rateNo change, it may change policy before reaching 2%. The Bank of Japan may consider exit strategy around FY 2019. When the time came, the Bank of Japan would discuss the exit strategy with the market. After the news, the yen rose sharply. The global economic upturn is expected to return inflation to Japan, which will cause the Bank of Japan to end its unconventional monetary policy (these policies are aimed at combating deflation) and raise it.interest rateTo cope with the new inflationary environment. These measures will narrow the US-Japan spread and support the yen's strength. Whether the 100 mark can appear, 2019 we will wait and see.

In 2018, the exchange rate of the world's major currencies against the US dollar fell almost completely across the board, with only the yen and the Mexican peso rising. In the 2018 spot return performance of the major currency-to-dollar exchange rate, the exchange rate of the yen against the US dollar rose by 2.73%, and the Mexican peso rose by 0.04% against the US dollar.

"In 2018, the disorderly fluctuations in the foreign exchange market have increased, making investment extremely difficult."

Xicheng GroupAnalystIt is pointed out that the disorderly fluctuations in the foreign exchange market in 2018 mainly stem from changes in policies, such as the withdrawal of the United States from the Iranian nuclear agreement; Trump publishes unexpected remarks from time to time, including arranging the Fed policy. These disorderly fluctuations make foreign exchange investors feel overwhelmed. When international relations change, exchange rates need to be repriced.

Looking forward to 2019, I hope that the US dollar will recover again. The attitude of the Fed may be much more than the hawks expected by the market. The US dollar index still has room to rise, and will even test the 100-integer mark. Until the weak economic indicators come out, the Fed will really turn, and the dollar may enter a weak channel.

Unordered and orderly, this is not only the expectation of foreign exchange investors, but also the call of the global brokerage market.

(Article source: Huitong.com)

                (Editor: DF307)

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