Markets: Event risk builds in Q1 - AmpGFX
Greg Gibbs, analyst at Amplifying Global FX Capital, suggests that there are significant event risks and asset market uncertainty in Q1 next year as the US President could be at loggerheads with the Democrat-held House of Reps, facing pressure from the Mueller investigation and at the same time as the debt ceiling issue returns and US-China trade talks are reaching the end of their 90-day initial deadline.
“At around the same time, the UK is facing its Brexit deadline.”
“The case for buying the USD is not strong since we might expect greater US financial market volatility, and economic and political uncertainty may lead to a prolonged period of pause in US rate hikes. It may increase expectations that the Fed will consider cutting rates sooner rather than later. Lower US yields could then reverse a significant portion of the gains in the USD in the last year.”
“However, the fact is that the USD has so far remained resilient. Global risk factors related to Brexit, EU politics, trade, economic and financial risks in China, appear to be, for now, weakening other major currencies more than the USD. Gold is stronger over recent months, however, illustrating that confidence in the USD has weakened.”
“Surprisingly we haven't seen a stronger performance from JPY. Overall FX remains a muddled picture with a range of competing influences that are highly uncertain and difficult to evaluate.”