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15th December 2014
A Look Back at 2014…

“The bulls are like the giraffe, which is scared by nothing or like the magician…who in his mirror made the ladies appear much more beautiful than they are in reality.  They love everything; they praise everything; they exaggerate everything.


The bears, on the contrary, are completely ruled by fear, trepidation and nervousness.  Rabbits become elephants, brawls in a tavern become rebellions, faint shadows appear to them as signs of chaos”


Joseph de la Vega

‘Confusion de Confusiones’, 1688



Joseph de la Vega





When it comes to our views on the pound sterling, there have been certainly times during the past year when we felt a little bit like Joseph de la Vega’s proverbial bears, mistaking the ‘shadows’ of a deteriorating current account deficit and housing and a consumption driven growth model for signs of impending chaos.


We were convinced that GBP was significantly overvalued, even as expectations for Bank of England interest rate rises began to push GBPUSD over...

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8th December 2014
ECB Monetary Policy Outlook in 2015

The Chairman of the ECB Mario Draghi’s continuous dovish sentiment and strategy to “talk down the euro” is running out of steam, knowing that there will come the time when he will have to act in order to convince the markets about the willingness to do “whatever it takes”. Although Thursday’s meeting proved that Draghi is struggling to get the consensus for a full-blown quantitative easing (QE), looking at the deteriorating economic state of the single currency area quantitative easing (QE) in 2015 seems to be a real possibility. In our view, there are three possible monetary policy paths that the ECB can pursue.



Path One: Quantitative easing in the first half of 2015 (30% probability)

In this scenario we would envisage the ECB to commence a round of the sovereign bond purchases in the first six months of 2015 with a magnitude between EUR 500bn-1tn. The allocation of QE purchases to...

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1st December 2014
Falling Oil Prices and Currency Movements – Cause or Effect?

The key to understanding the implications of the falling oil price on financial markets is to figure out whether low energy prices can stimulate improved economic productivity, or whether they simply reflect a sluggish picture of global economic growth…


OPEC’s decision not to cut protection last week was the catalyst for another leg lower for an already beleaguered oil price – Brent crude has declined by about 12% since news began to leak out of the meeting in Vienna that production would be not be reduced, bringing the year-to-date decline to 37%.


Such a dramatic collapse in one of the global economy’s primary input costs is clearly hugely material for all financial markets. On the surface, it could be considered a powerful source of financial stimulus – according to some analysts, it is the equivalent of an injection of over half a billion dollars for the global economy. However, it is...

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