Positive global growth to drive currencies in 2018
Global growth will be a key driver of currencies in 2018, a year in which the foreign-exchange industry will have to adapt to the strictures of Mifid II and a self-governing code of conduct.
If 2017 was all about keeping a close eye on outgoing Federal Reserve chair Janet Yellen for clues about US monetary policy moves, 2018 will be about taking a bird's eye view of global growth and how that drives market moves.
Bank analysts at Barclays and Goldman Sachs predict global growth will hit 4% next year –an all-time high since 2011 – with economists at the US bank announcing the outlook is “as good as it gets”.
Daniel Been, ANZ
Currency analysts like Daniel Been, head of FX strategy at Australian bank ANZ, are pinning currency moves to this predicted growth.
Been says: “The key to managing risk in 2018 will be in understanding how aggregate global growth and broad liquidity are evolving and what that means for market volatility, rather than being another year where the slightest nuances in US monetary policy dictate the whole cycle.
"As such, moving into 2018, we think FX markets are highly leveraged to the growth cycle.”
On the back of economic growth, ANZ analysts forecast an appreciation of Asian currencies, supported by continued export momentum in the region and policy normalization in some Asian countries.