The end of 2015 is drawing near and with it a new tranche of Saxo Bank’s outrageous predictions has hit the newswires, fomented by the group’s leading investment minds.
As was the case in last year’s report, Saxo Bank’s team has spearheaded a plethora of predictions, led by Chief Economist and Chief Investment Officer (CIO) Steen Jakobsen, who has carved out a name for himself by way of bold and sometimes controversial insights. Despite the proverbial knee-jerk reaction garnered from first takes however, Saxo Bank’s predictions have sometimes shown to have a basis in reality in years past.
While many of the 2015 predictions unfortunately did not come to fruition, there was a healthy level of speculation heading into the calendar year that certainly did not disappoint in terms of the unforeseen, for example, the Swiss National Bank (SNB) tomfoolery. Consequently, Finance Magnates investigates the upcoming 2016 predictions to cast light on some of the boldest minds in the industry.
Forget EURUSD Parity, How About 1.23?
The first bold prediction touches on one of the most hotly contested issues for foreign exchange (FX) traders- the direction of the EURUSD pair. Mr. Jakobsen himself not only sees legs for an invigorated pair but for a run all the way up to 1.23. The stance is certainly not the first time that this figure (or figures close to it) has been suggested, but its simply viewed as a huge long shot. Many leading analysts, even since last year, have been making a call to parity, yet Mr. Jakobsen cites the propensity of a deep recession and Europe’s continued account surplus as instrumental factors in a rise.
Growth In the Most Unlikely Realms
It was not that long ago that the Russian ruble was getting trounced, headlines were spelling out crippling sanctions, and analysts were outdoing each other for the lowest price target for crude oil. Will anything change in 2016? John Hardy, Saxo’s Head of Forex Strategy, seems to think so, as he sees the combination of mounting US oil demand and the Fed’s disjointed monetary policy helping give the ruble and emerging markets (EM) currencies a welcome boost.
Speaking of EM, Brazil has served as the paradigm for dysfunction in this regard, with a litany of factors conspiring against growth – try five straight quarters of negative GDP growth…step aside Greece! However, the 2016 Olympics could allay the country’s moribund economic woes and spark an EM rebound. Saxo’s Head of Macro Strategy, Mads Koefoed, sees EM currencies flexing their collective muscles en route to a 25% yearly gain.
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Trump Hoopla Goes from Interstellar to Extinct in Historic Rout
Amidst a bitter struggle for its identity, the US Republican party is currently more akin to a broken watch than a unified force. And while a broken watch can be right twice a day, one of those days will definitely not be November 8, 2016, the date of the US general election.
Mr. Hardy sees the bucking of a long standing party turnover trend in the White House, with a 2016 landslide election in favor of the Democratic party – with respect to Bernie Sanders and his bombastic ways, this means a presidency involving Hillary Clinton as the US Commander in Chief. What does this mean for the world? Apart from a well-deserved hiatus from Donald Trump’s self-immolating chaos theory, the USD could take a tumble at least initially following the election in Q4 2016.
How Low Can Oil Go? Hint: Triple Digits
On a seemingly daily basis, everyone from Goldman Sachs to (insert name of generic analyst) is predicting oil to tank, no pun intended. One such individual who is not joining this party is Ole S Hansen, Saxo’s Head of Commodity Strategy, who sees OPEC instability triggering a boost to $100 a barrel. While a rebound is definitely not out of the question, Hansen sees an abrupt reversal with everyone jumping on the bandwagon in a run to major gains.
Speaking of commodities, unless you’ve been living under a rock, or returning from some wormhole in space this year, you know that precious metals have been getting thrashed in 2015. As recently as February, gold was trading at the $1300 level…though that was a long, long time ago. Silver has been just as cursed in 2015, withering off the $18 handle all the way down below $14 recently – just don’t tell Saxo’s Hansen this.
With a potential boost in confidence from investors and a surge in its use in the construction of solar cells, in which silver is a vital component, prospects for the metal in 2016 could be looking quite shiny, possibly in excess of a 33% gain for the year.
Hola El Niño!
2016 is slated to be hot, and by hot we are referring to the number displayed on your iPhone weather widget (sorry thermometer manufacturers, its been a good run…). What this influx in temperature means is a greater probability of flooding, droughts, and other cyclical natural events, a la El Niño. More specifically, global agricultural production will be more fragile than ever, which may see a 40% surge in the Bloomberg Agriculture Spot Index, according to Saxo’s Peter Garnry, the group’s Head of Equity Strategy.