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Volatility expected to accelerate near-term – Danske Bank

FXStreet (Edinburgh) - Strategists at Danske Bank expect the volatility to pick up the pace in the short term.

Key Quotes

“In the short term, we see a risk that volatility could go up if we get a re-pricing of the short end of US yields”.

“Historically, it has given some headwind to Emerging Markets and the fact that it is happening alongside a slowing Chinese economy could prove a short-term challenge for EM assets”.

“However, our medium-term view on risk assets continues to be positive based on mainly (a) continued global recovery supporting decent earnings growth, and (b) very low rates for a long time and ample liquidity as the ECB and BoJ will keep the liquidity flowing for a long time”.

“On a positive note, the Ukraine crisis seems to have calmed down. This could prove a turning point but it is still too early to draw any conclusions on this and uncertainty will remain high”.

“New sanctions from the euro zone are now being implemented and Russia has threatened to reduce gas supplies to the EU in order to avoid re-exports to Ukraine”.

“However, the new EU sanctions will be lifted next month if Russia abides by the truce entered last week.

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