By Philippe Bonnefoy, Chairman & CIO of Newscape Capital Group, and manager of the Newscape Dynamic Rates & Currency Fund
The current trading outlook on the currency markets:
On The Euro/USD:
“When was the last time we saw an increase in a European growth forecast? The IMF keeps dropping its estimates and the Bundesbank just slashed its growth forecast for 2012 by 30%, and its 2013 forecast by 75%, and they actually expect growth to be negative this quarter.
“The fact that Germany is the growth engine of Europe and today’s announcement that Industrial production fell 2.6% in October (versus an expectation of flat growth) should scare investors out of being long Euros. We are sellers around these levels.
“In the US, the fiscal cliff becomes a fiscal bump as the contentious issues are booted into next year with a fiscal fudge. We would be buying the US dollar, as we see the US housing situation stabilising and the banking system has already been restructured. This has not yet happened in Europe. In the battle of the uglies, the US dollar currently wins.”
On CHF:
“The Swiss National Bank has tried to hang up a sign saying “Go Away!” Credit Suisse just announce they are going to charge clients for holding CHF deposits. The problem in Switzerland is that if the currency strengthens much more the local manufacturers get slaughtered. By continuing to be resolute about the Euro/Swiss exchange rate the SNB is trying to protect the global competitiveness (and survivability) of Swiss based manufacturers and service businesses.”