Saxo Bank, the online multi-asset trading and investment specialist, has published its quarterly outlook for the global markets and its key trading ideas for 2015.
“The global economy and policy mix is about as out-of-synch as it has ever been and we are faced with major geopolitical risks that could deepen with the advent of sub-60 dollar oil prices,” said Saxo Bank’s latest outlook.
“Inflation is at multi-decade lows even as monetary policy is extremely loose in most of the developed economies and tight in emerging economies, with the US Federal Reserve the lone developed economy central bank expected to begin a tightening cycle soon – likely around mid-year.”
Saxo Bank added that, meanwhile, credit spreads trade below default rates and yields and volatility is still near historic lows.
“Balancing the global economy in 2015 will require countering the slowdown in emerging markets, combatting deflation and confronting rising debt to GDP ratios.”
Steen Jakobsen, Saxo Bank’s chief economist, says that eventually the path of least resistance in 2015 is a lower dollar, stable to slightly higher energy prices and unchanged interest rates.
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“Though the point of maximum dislocation, based on an extension of the trends we saw building in 2014, will be seen in the first quarter, as the ECB risks making a terrible decision by hitching its wagon to a new QE programme.”
Currency markets will see considerable volatility in 2015.
The most likely trend is not so much a stronger US dollar but a weaker dollar although Saxo Bank expects the greenback will continue to strengthen in Q1 with the prospects of currency wars emerging, particularly in Asia.
Saxo Bank’s key FX trade recommendations for Q1 2015 are to go long USD/CHF to position for possible punitive negative rates from the Swiss National Bank in March.
“We’re also looking at selling the Chinese yuan versus the US dollar and eventually against the Japanese yen to position for a possible Chinese currency devaluation which could see China exporting deflation to the rest of the world.”
Saxo Bank expects the global economy to grow by three per cent in 2015, compared to 2.2 per cent in 2014, driven by low energy prices, less austerity in advanced economies and higher trade growth, with the major downside risk to global growth in 2015 coming from geopolitical tensions.