NEXT PUBBLICATION: 07.11.2017
The Recent release of macroeconomic data’s confirmed that economic activity continues to grow on both sides of the Atlantic.
In the United States, the FED slowly continues the normalization of the interest rates by closely monitoring the evolution of inflation and the trend in employment.
The recent devastating hurricanes will negatively affect the macroeconomic data which will be released in the coming months, but we believe that these catastrophic natural events could in the medium term positively stimulate employment and public spending, effectively helping America.
The central banks continue in the difficult process of normalizing their monetary policy by trying to sustain economic growth without too much shrieking. As predicted, in September’s meeting, the Fed announced that it will begin the budget reduction process and has prepared the financial markets for a rise in rates during the next month of December.
Supported by a certain stabilization of the exchange rate, after a bullish period, the European Central Bank (ECB) will begin to reduce their bond purchase program starting in 2018.
The divergence between the USD and EUR rates that would result out of the above mentioned policies could potentially boost the US dollar but only starting as of the end of the last quarter of 2017, and then continue during 2018.
Geopolitical risks have recently risen (North Korea and the risk of escalating war, Elections in Germany and the complex negotiations to find a majority coalition and the vote of Independence in Catalonia and clutches with Madrid) but for the moment, apart from small market retracements, the financial market players seems to ignore the above mentioned events by suggesting relatively quick and painless resolutions.
We believe that these risks should not be underestimated, we believe it is still premature to disinvest from risky underlying’s but we suggest to hedge the downside risk that in case of event could possibly be sudden and rather violent.