Saxo Capital Markets LTD: USD to stay strong despite the US fiscal cliff and the Fed's open-ended QE programme
(Thomson Reuters ONE) -
* Obama winning a second term may mean a short term pop in risk appetite, but
could mean the risk of a worse fiscal cliff and few policy developments
going forward due to political gridlock
* The US fiscal cliff is a real threat to the US economy, but certainly not to
the US Dollar - quite the opposite
* Latest e-book from Saxo Capital Markets launched, arguing the Fed's QE will
not kill the US Dollar
The US Dollar will remain a strong currency in the medium term despite the
looming US fiscal cliff and the harmful effects of the Federal Reserve's open-
ended and theoretically unlimited quantitative easing (QE) programme, says Saxo
Capital Markets UK.
John J. Hardy, Head of FX Strategy at Saxo, comments:
"Obama's re-election means political and Federal Reserve business as usual in
the US - but also means plenty of uncertainty surrounding the fiscal cliff.
In "The Dollar & the Fed: QE won't break the buck", the first e-book in Saxo
Capital Markets' FX Debates Series, Saxo envisages that the USA and its currency
are in a far superior position than the other major countries thanks to stronger
fundamentals. As a consequence, the Dollar is likely to stay stable or
appreciate over the next 12 months.
Hardy continues:
"The Dollar still looks better than most other major currencies regardless of
the fact that QE is not working and is not the right prescription for the
economy.
"The Federal Reserve's aggressive quantitative easing programme, while it may
have kept the economy on a kind of life support and prevented a steep
deflationary environment in the initial phases of the deleveraging cycle, has
done little to address the structural problems of the economy. In fact, at this
point, it risks inflicting harm rather than helping. It presents risks of new
asset bubbles - most dangerously in commodities - and keeps too much of the
worst kind of debt in the system alive while meting out negative real interest
rates on savers.
"The way Obama and the lame duck Congress tackle the impending fiscal cliff will
be of crucial importance for the US economy. Ironically, the worse the fiscal
cliff, the better the Dollar will likely do because the US Dollar is so linked
to global risk appetite and the threat of a US recession would likely see the
USD appreciate.
"Another big USD event in the pipeline is next year's appointment of a possible
new Fed Chairman if Bernanke decides not to run or if the political environment
proves hostile to nominating someone of Bernanke's always-QE-all-the-time
stripes. The process starts as early as mid-2013 and could prove quite a
distraction. Any threat to the Fed's QE gravy train or suggestion that someone
of a less-dovish bent could replace the Fed chairman could see the USD soar.
According to Saxo Capital Markets, the US economy is still better placed
relative to other large countries. The main factors supporting the Dollar
include:
* A difficult transition period in China - the country needs to make large
structural adjustments in order to boost domestic consumption to replace
dwindling demand from abroad;
* The 'reshoring initiative' has started as US manufacturing costs have become
far more competitive for some companies relative to China.
* The 'Shale Gas Revolution' in the US means producers can look forward to
vastly cheaper energy than the rest of the world pays for gas-driven
electricity and heating. It's a boon to consumers as well.
* The US demographic profile if far younger than Japan and Europe where the
proportion of pensioners is soaring and will continue to do so far more
quickly than in the US for decades;
* The US Government could consider a second round of the Homeland Investment
Act (HIA), which could stimulate the economy without adding to the fiscal
burden by allowing US corporations to repatriate foreign profits with either
no tax or very little. The potential USD-positive flow from this alone is in
the hundreds of billions of USD;
* The Eurozone crisis weakening the Euro;
* The currencies of the commodity economies (e.g. Canada and Australia) are
currently overvalued.
The #FXdebates series of articles will be published bi-weekly over the next four
months, leading the way to an event in February 2012 in collaboration with
Bloomberg LINK.
The other articles in the #FXdebates series will focus on:
* Gold - Just another currency?
* The Euro in Crisis
* Currency Wars: Battle Of The Weakest
* Yuan Diplomacy
For more information please see: http://uk.saxomarkets.com/fxdebates
Follow the debates via twitter: https://twitter.com/SaxoMarketsUK
Hashtag: #FXdebates
Media enquiries
Uriel Alvarado Cancino, Chief Public Relations and Marketing Officer, Saxo
Capital Markets UK
+44-(0)207-151-2026, ukmedia(at)saxomarkets.com
Nicholle De Beer, Public Relations and Marketing Manager, Saxo Capital Markets
UK
+44-(0)207-151-2024, ukmedia(at)saxomarkets.com
Smithfield
+44 (0) 20 7360 4900, ukmedia(at)saxomarkets.com
About Saxo Capital Markets
Saxo Capital Markets UK Limited is a wholly owned subsidiary of Saxo Bank A/S,
the parent company of the Saxo Bank Group, an international financial services
group specialising in trading and investment across global financial markets.
Saxo Bank has operated in the UK since March 2006, initially as a branch of Saxo
Bank A/S and since 1 January, 2012 as Saxo Capital Markets UK Limited.
Saxo Capital Markets UK offers private investors online trading and investment
in FX, CFDs, ETFs, Stocks, Futures, Options and other derivatives, and online
wealth management for Funds, Shares, ETFs, Certificates and Bonds. Saxo Capital
Markets UK also offers online trading services to a broad institutional client
base including Hedge Funds, Introducing Brokers and Money Managers through our
award-winning trading platform SaxoTrader, SaxoWebTrader and SaxoMobileTrader
and Saxo's B2B/API services.
Additionally a large base of Banks, Brokers, Asset and Money managers, utilise
our award winning white label solutions, in order to provide their clients with
access to all or some of our trading platforms and associated liquidity.
Find out more about FX Trading opportunities with Saxo Capital Markets.
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Saxo Capital Markets LTD via Thomson Reuters ONE
[HUG#1655716]
Unternehmensinformation / Kurzprofil:
Datum: 07.11.2012 - 09:27 Uhr
Sprache: Deutsch
News-ID 200363
Anzahl Zeichen: 7597
contact information:
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