FIRSTLY: On behalf of Ossie and I PARITYFX WOULD LIKE TO WISH YOU AND YOUR FAMILIES A HAPPY NEW YEAR. MAY 2015 BRING YOU MUCH HEALTH, HAPPINESS & PROSPERITY.
THANK YOU FOR ALL YOUR SUPPORT THROUGH 2014 AND LET’S MAKE 2015 A YEAR TO REMEMBER!!!
The WINNER of the prize for the best performing currency of 2014 is: The MIGHT UNITED STATES DOLLAR or as we know it USD.
The USD will end 2014 with a gain of 12% against a basket of major currencies. The much anticipated US interest rate hikes will only strengthen its appeal in 2015. 2014’s gains will be the USD’s largest since 2005, when it climbed nearly 13%. But hey let’s not be picky over 1%.
The divergence between the FED’s path toward rate hikes and stimulative monetary policies in the EU and Japan has helped the $ index (90.325) hit an eight-year high this year, and is likely to remain a key theme in 2015 as we at ParityFX have written about in just about EVERY comment since July this year. Back then the EURUSD was trading at 1.3650 and PARITYFX put out a recommendation that the EURUSD will reach 1.2000 by 31 December 2014. I did alter that slightly in November to 1.2200 and I am glad to say that was reached a couple weeks ago. Not that I am trying to give myself a pat on the back (ok I will) we are VERY PROUD of the trade recommendation and once again proves why WORKING WITH PARITYFX WILL ULTIMATELY SAVE YOU MONEY.
Recent solid data from the US has reinforced the view that the economy is improving enough for the FED to begin raising interest rates in MAY/JUNE 2015. Most commentators have gone for AUGUST/SEPTEMBER. I am of the opinion that the data will only get stronger and this will be the catalyst for FED Pres. Yellen to SURPRISE the market and hike EARLIER than widely expected. This rate hike cycle will reinforce our view that the USD is heading towards PARITY(FX) or 1.00:1.00 against the EUR. While other commentators have agreed with this synopsis they are looking at this happening in 2016 or beyond. I am of the opinion that the race to PARITY will happen SOONER than we think given the HUGE disparity between the US and EU. The Greek situation could very well be the catalyst we need to ignite the break through 1.2000 which then opens the door for a move to 1.1000 followed by 1.00:1.00. So far we have hit the nail squarely on the head!!! I cannot stress HOW STRONGLY I FEEL ABOUT THIS. Then again this is MY OPINION only.
Peter Praet, the ECB’s Chief Economist signalled in a recent interview with a German publication that the ECB policymakers may soon consider large-scale asset purchases, including sovereign bonds, at their next meeting on January, 22. Praet warned that EU inflation is expected to drop below zero “for a longer period” in 2015 against the backdrop of falling oil prices, and the Governing Council “cannot simply look through” that. Praet added the ECB must “not be paralyzed” by the problems a quantitative easing (QE) programme might bring. Sovereign bonds are “the only kind of asset for which there is a significant market volume.” Praet also made reference to the Greek snap elections, saying “the rise of political parties opposed to structural adjustments is a warning signal. Populists in some countries promise fast and simple solutions but their proposals would be a complete disaster.” AMEN to that!! As we wrote earlier this week, a hard-line left wing Syriza party win will in all likelihood cause insurmountable problems for the EU/ECB and potentially create a CRISIS, one which will make the Lehman Brothers (a Bank I worked for and loved) collapse seems like child’s play. I find it almost unbelievable that given the enormous complexities and problems the EU is facing there are people out there that seem to live in a bubble and deny the need for help. They should all hop on a ferry and go live on one of Greece’s beautiful islands and leave the real work to the professionals.
So quick opinion on 2015. (1) The USD continues to rally strongly vs the basket (EUR, GBP, JPY, CAD, AUD, NZD, SEK, NOK). Emerging Market currencies (ZAR, ILS, TRY, MXN, KRW, INR) will inevitably all trade weaker as the USD continues its march. (2) Oil will find a bottom once the realisation sets in that the market is bigger than the sum of its parts. (3) Inflation will be the “winner” as we have seen over the course of the year, (4) GBP will power ahead vs the EUR breaking through 1.3000 (0.7700), (5) PARITYFX WILL CONTINUE TO OFFER OUR CLIENTS THE BEST RATES AND ADVICE. SIMPLE!!
AS we approach the last hours of 2014 the FX markets have gone into hibernation. Our ticker is barely changing. So it appears we are now done for the year. My hope is you had a good year all round.