Currencies

In this Insight, we discuss the outlook for monetary policy in New Zealand after this week’s RBNZ policy meeting, and introduce related fixed income and currency trade ideas.

The recent increase in Korean exports will likely prove to be a mid-cycle rebound within a cyclical downtrend. Korea’s households and enterprises are among the most indebted globally, and their debt service ratio is among the highest in the world. Korea’s 10-year bond yields have peaked. We discuss opportunities in Korean stocks as well as in fixed income and currency markets.

Our political forecasting scored wins in 2023 but we failed to capitalize on it adequately in our trade recommendations.

A cyclical recovery in China’s economy is still not imminent. The PBoC has tightened interbank liquidity to stabilize the exchange rate since late August. This does not bode well for the real economy. The uptick in onshore bond yields and the RMB’s appreciation will be transient. Equity investors should stay cautious.

Today, we are sending you the BCA annual outlook for 2024. The report is an edited transcript of our recent conversation with Mr. X and his daughter, Ms. X, who are long-time BCA clients with whom we discuss the economic and financial market outlook for the next twelve months toward the end of each year.

This report looks at the prospects for the Swedish krona, following the pause by the Riksbank.

Contrary to the prevalent belief in the global investment community, goods/merchandise inventories in the US and East Asia are rather elevated. Financial markets respond to final demand fluctuations, not inventory restocking. Global manufacturing/trade will continue contracting, even though the pace of contraction might moderate in the near run. We recommend that investors fade the current rally.