Saxo Bank: 2018 should prove to be dynamic, with many subplots, increased volatility
Baku, Azerbaijan, Jan. 22
By Anvar Mammadov – Trend:
With strong momentum from an extraordinary risk-taking year in 2017, this year should prove to be dynamic, with many subplots and increased volatility, John Hardy, Head of FX Strategy at Saxo Bank, told Trend.
“Looking ahead, we see clear “known knowns” that are quite likely to disrupt the one-way complacency of 2017 at some point in 2018, whether already in Q1 or not until the second half of the year,” he noted.
“A number of leading inflation indicators point to the risk of a strong pickup in inflation already in the first half of 2018. The US budget deficit widened in 2017 for a second consecutive year and should widen aggressively in 2018 as a result of the funding shortfalls from President Donald Trump’s rushed tax reform policy,” added the expert.
“EM and riskier currencies could enjoy some further upside on the global growth upswing story but gathering headwinds will arrive if volatility picks up notably, which is one of our base assumptions. The only perceived path to a surge of strength in the greenback is if some sort of real liquidity crisis develops at some point – the perennial fat-tail risk. That risk may only materialise if we see the much-discussed global market melt-up risk unfolding first,” said Hardy.