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27th October 2014
What will happen in the currency markets if we see another downturn in equities?

Looking back, the plunge in equity markets two weeks ago now seems a distant memory. After falling 7.5% in just five days, last week saw the move in the S&P 500 entirely retraced closing Friday’s session at 1,964. While European stocks are still significantly lower than their September highs (the FTSE 100 is down almost 7% since the beginning of September) the fear and panic that were evident two weeks ago has subsided for the time being at least.

 

That said, price action in recent weeks suggests an element of nervousness has crept back into the markets after a year of relative calm. Clearly there are a number of risk factors to consider; the prospect of tighter monetary policy from the Fed, political and economic uncertainty in Europe, the economic slowdown in China, troubles in the Middle East and the threat of Ebola to name a few, any of...



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20th October 2014
Halloween comes early for the financial markets

Last weeks’ shake up in the financial markets was dramatic, to say the least. All the ingredients for the storm have been lingering in the background for months (in some cases years) - overvalued stock markets, concerns over growth in China, risk of deflation, geopolitical tensions in Ukraine and the Middle East and uncertainty over global monetary policy. However, it took one good stir with Brent crude reaching a 4 year low, UK inflation dropping more than expected and the most important ingredient: uncertainty and fear to trigger the big sell-off (the threat of Ebola probably didn’t help either), leading to stipulation that 2014 could be the next 2008.

 

Let’s look at the five spookiest financial market events of the last week: 

 

1. Volatility is back

Volatility has reached the highest level in two years, surging above 25 points using the options volatility index (VIX). Although this is...



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13th October 2014
A closer look at the ‘euroglut’

Deutsche Bank’s recent prediction of a 25% decline in the value of the euro over the next two to three years is based upon the theory that the ‘Euroglut’, the excessive amount of European savings generated by Europe’s large current account surplus, will lead to “the largest capital outflows in the history of financial markets”.  We look at three potential problems with this prognosis…

 

“As equity, fixed income and FDI outflows pick up, the euro should face broad-based weakening pressure.  Our end-2017 forecast for EUR/USD is 95 cents”

Euroglut: a new phase of global imbalances

Deutsche Bank

6th October 2014  

 

Listening to financial pundits over the last month or so, you could be forgiven for thinking that selling the euro versus the US dollar was as close to a one-way bet as you can get in financial markets these days.  Following an incredibly strong performance by the USD...



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