汇丰银行-全球-宏观策略-全球通货展望：当鸽子拍动翅膀-2019.5-46页.pdf

Disclosures&Disclaimer:This report must be read with the disclosures and the analyst certifications inthe Disclosure appendix,and with the Disclaimer,which forms part of it.CurrenciesGlobalMay 2019By:HSBC FX StrategyCurrency OutlookWhen doves flap their wingsThe dovish pivot among G10 central banks beyond the US continues,fostering an extension higher in the USD.The dollar rally may also have some juice left from the US side of the equation.With a fresh battle looming between the Fed and a dovish market,the high yielding USD remains our pre-eminent currency of choice.Weakness on an industrial scale G10 FX performance has been closely linked to the manufacturing sector in 2019.Currencies with large manufacturing exposures have underperformed those with smaller exposures.For now it seems there is more depreciation to come,with the manufacturing sector showing little sign of stabilising.1 Currencies Global May 2019 The pivot when doves flap their wings(pg 3)The dovish pivot among G10 central banks beyond the US continues,fostering an extension higher in the USD.In some instances,a lot of the move in the USD is likely already complete as markets digest central bank pivots.But,the USD rally may have some juice left from the US side of the equation,rather than simply because of other central banks becoming more dovish.With a fresh battle looming between the Fed and a dovish market,the high yielding USD remains our pre-eminent currency of choice.Even if all central banks did nothing for the rest of the year,this would still be to the USDs advantage.Weakness on an industrial scale(pg 8)G10 FX performance has been closely linked to the manufacturing sector in 2019,currencies with large manufacturing exposures have underperformed those with smaller manufacturing sectors.This may help to alleviate some of the sectors woes at some point.But for now it seems there is more depreciation to come,with manufacturing showing little sign of stabilising.Even if FX can provide some cyclical support,it is not clear that this depreciation would be enough to offset some of the potential negative trends which point to long-term weakness in manufacturing and those currencies most exposed to it.The Great Gapsby(pg 11)Gap risk is much more prevalent now despite broadly lower volatility across asset classes.This matters more for short-term market participants,whereas longer term investors should only worry if implied to realised volatility falls to much lower levels than at present.Machine Learning 102(pg 13)Machine learning is becoming increasingly important in financial markets and even non-technical financial market participants can benefit from a high-level understanding of the important concepts.In this report,we focus on a family of machine learning models known as decision trees.Data Matters(pg 14)The consensus is increasingly looking for a period of stable global growth but low inflation.However,when we look at the pattern of asset returns this year,it appears that the true Goldilocks period was confined to January.In contrast,the returns seen over April were more consistent with a classic risk-on move with positive returns from risk-on asset classes.Summary Currencies Global May 2019 2 Key events Date Event 22 May FOMC meeting minutes 29 May BoC rate announcement 4 June 6 June 13 June RBA rate announcement ECB rate announcement SNB rate announcement Source:HSBC Central Bank policy rate forecasts(%)Last Q2 2019(f)Q4 2019(f)USD 2.25-2.50 2.25-2.50 2.25-2.50 EUR 0.00/-0.40 0.00/-0.40 0.00/-0.40 JPY-0.10-0.10-0.10 GBP 0.75 0.75 0.75 Source:HSBC forecasts for Fed funds,Refi rate/Deposit rate,Overnight Call rate and Base rate Consensus forecasts for key currencies vs USD 3 months 12 months EUR 1.140 1.171 JPY 110.1 108.6 GBP 1.327 1.364 CAD 1.322 1.305 AUD 0.707 0.719 NZD 0.673 0.673 Source:Consensus Economics Foreign Exchange Forecasts April 2019 3 Currencies Global May 2019 Doves sing,USD flies A key aspect of our bullish USD view is our perspective on the shifting mood among developed market central banks.While we accept that the Feds pivot away from suggestions of further rate hikes would,in isolation,seem USD negative,the world of FX is all about relatives and other central banks were always likely to follow suit,in our opinion.The pace at which other central banks have chosen to echo the Feds shift has varied,but the direction has clearly been in a dovish direction.Interestingly,the past month has seen a particular escalation in the number of banks keen to offer increasingly dovish forward guidance.New Zealand:The RBNZ cut its cash rate by 25bp on the 8th of May to a new record low of 1.5%becoming the first in the G10 currency bloc to do so since November 2016(also RBNZ).This follows a steady progression of dovish rhetoric since Governor Orr joined the bank in March 2018.As we have often argued,a proactive policy stance reflects a high sensitivity to global growth as a small open economy,with a weaker currency being an attractive by-product of cutting first.Australia:The RBA kept its cash rate unchanged at 1.50%on the 7th of May.In the Bloomberg survey,14 economists expected a hold,while 15 economists had expected a 25bp cut.The OIS market was 45%priced for a cash rate cut just before the announcement.The AUD reprieve is likely to be short-lived as cut expectations remain entrenched.A worrying trend for the AUD is the ongoing decline in longer-dated bond yields,implying that,by delaying easing,more cuts may have to be delivered down the line.Canada:The BoC dropped the reference to the timing of future rate increases from its policy statement accompanying its 24 April meeting.It also lowered its estimate of the range for the neutral interest rate by 25bp to 2.25%-3.25%.Japan:At its meeting on 25 April,the BoJ statement said it would keep extremely low rates“at least through the spring 2020”and in the subsequent press conference,Governor Kuroda added that there was“ample possibility it will be longer.”Sweden:The Riksbank used its 25 April meeting to announce a delay to the likely timing of its next interest rate hike and a reduction in the path for interest rates thereafter.The pivot when doves flap their wings The dovish pivot among G10 central banks beyond the US continues,fostering an extension higher in the USD In some instances,a lot of the move in the USD is likely already complete as markets digest central bank pivots With a fresh battle looming between the Fed and a dovish market,the high yielding USD remains our pre-eminent currency of choice Currencies Global May 2019 4 The Fed may have pivoted to a patient position,but that is in the past.The market is having to adjust to those now adopting a similar strategy.The USD rally which had lost steam during Q4 18 has been able to extend gradually higher in 2019(see chart 1).The pace has not been spectacular,perhaps more glacial in nature,but then glaciers are relentless.1.The continued dovish pivot elsewhere in G10 has helped to push USD higher Source:HSBC,Bloomberg Pivots priced in?The dovish pivot among G10 central banks is already pretty well advanced with big revisions to rate expectations.Charts 2 and 3 look at the shift in consensus and market rate expectations,respectively,since the December 2018 FOMC meeting.We use this event as the jumping off point for the comparison because the Fed shift in rhetoric happened shortly after this meeting,culminating in the Feds formal pivot at its January 2019 meeting.Forecasters and markets have moved in tandem.The reappraisal across G10(with the exception of Norway)has likely been a frustration for the consensus USD bears who might have hoped that an end to the Feds tightening cycle would finally set the USD on a sustained weakening path.That has simply not been the case,as the revision in rate expectations elsewhere has provided the offset.2.Consensus expectations for G10 rates have dropped 3.as have market expectations -60-50-40-30-20-100102030-60-50-40-30-20-100102030AUDNZDCADUSDGBPCHFEURSEK JPY NOKChange in market rate exp.since December Fedbp Note:Measures December 2019 rate expectation Source:HSBC,Bloomberg Note:Measures December 2019 rate expectation Source:HSBC,Bloomberg 1090111511401165119012151240889092949698100Jan-18Mar-18May-18Jul-18Sep-18Nov-18Jan-19Mar-19May-19DXY IndexBloomberg dollar spot index-60-50-40-30-20-1001020-60-50-40-30-20-1001020CADUSDNZDAUDSEKGBPCHFEUR JPY NOKChange in consensus rate exp.since December Fedbp 5 Currencies Global May 2019 The fact that this pivot outside the US has continued reaffirms our comfort with our USD bull view.While a lot of the shift in rate expectations may already be in the past,this does not rule out further dovish iterations.As April demonstrated,the situation is still evolving.For example,the BoC may have dropped its signal of potential future rate increases but we have yet to see them move towards an easing bias.Neutral can pivot to easing.And even for those already signalling or delivering an easing,things can develop further.The RBNZ just cut interest rates at its May meeting,and this has forced a further recalibration lower for market rate expectations.In some instances,we accept that a lot of the move in the USD exchange rate may be behind us.It was just over a year ago when we moved our view from being USD neutral to being USD bullish.This was reflected most notably in our year-end 2019 EUR-USD forecast of 1.15.At the time,the median consensus expectation was for EUR-USD to finish this year at 1.30.Later we revised even lower to 1.10 and have watched the consensus drop lower over time(see chart 4).4.The consensus has been(and remains)overly bullish on EUR-USD 1.051.101.151.201.251.301.351.051.101.151.201.251.301.35Jan-18Mar-18May-18Jul-18Sep-18Nov-18Jan-19Mar-19May-19ConsensusHSBCEnd 2019 EUR-USD forecast:Source:HSBC,Bloomberg EUR to remain weak We still see room for limited further downside from the current level even if we have travelled a long way from 1.21 in EUR-USD when we moved to our bullish USD position last year.Amid the dovish re-orientation in G10,the adjustment regarding the ECB has been relatively modest.The market may be looking for rate cuts from the US,Canada,Australia and New Zealand over the next year,but it is priced for 10bp of tightening from the ECB.It is difficult to envisage a scenario where the ECB would be able to de-link so comprehensively from the policy direction in the rest of G10,barring some miraculous independent acceleration in economic growth and inflation.The slightly better than expected print on Eurozone Q2 GDP growth may give some grounds for optimism but while momentum is edging higher,growth at 1.2%YoY remains soft by historical standards.The other persistent problem is the lack of meaningful inflation.We expect policy to remain unchanged at the ECB this year and next.Fed vs the market The USD rally may also have some juice left from the US side of the equation,rather than simply because of other central banks becoming more dovish.A pattern evident since the Fed first began to signal its intentions to normalise policy rates back in 2014 has been a market convinced the Fed will raise rates more slowly than policymakers expect.In 2015 and 2016,the market won this particular debate with the Fed ultimately capitulating to the dovish market and delivering only one hike in each year.However,in 2017 and 2018,the tables were turned and the market was forced to recalibrate its rate expectations higher as the Fed delivered the sequence of hikes laid out in its“dots”projections.Currencies Global May 2019 6 So far in 2019,the market has gained the upper hand with the Feds dovish pivot in Q1 2019.But another fight may be looming for the rest of 2019.The market is once again envisaging a path for policy that is tracking below the median expectation of Fed policymakers(see chart 5).5.The market is once again expecting rates to track lower than the Fed suggests 1.752.002.252.502.753.003.253.503.751.752.002.252.502.753.003.253.503.75201920202021Longer TermMedian Dots ProjectionsFed Funds Futures%Source:HSBC,Bloomberg In December 2018,interest rate doves might have pointed to collapsing equity markets,growth disappointments and lower inflation as factors warranting a policy ease.However,they are now almost exclusively reliant on the inflation dynamic.Core inflation has been tracking lower,notably using the PCE deflator measure(see chart 6).In addition,HSBCs inflation surprise index for the US has been moving consistently lower,which means various price measures(e.g.CPI,PPI,import prices,employment costs,GDP deflators,ISM price components)are coming in lower than expected.6.US inflation is not only low 7.but also lower than expected -94-91-88-85-82-79-76-73-70-94-91-88-85-82-79-76-73-70Jan-18 Apr-18Jul-18Oct-18Jan-19 Apr-19US inflation surprise index Source:HSBC,Bloomberg Source:HSBC,Bloomberg The tension in the debate will therefore centre on the offsetting signals from activity.US activity data in aggregate has come in broadly in line with expectations in recent months but has been a mixed bag at times,including the upside surprise on Q1 GDP but disappointments on the ISM readings for April.In addition,the tightening of financial market conditions that helped drive the Feds dovish pivot in the first instance has now fully reversed alongside the bounce in US equity markets which are back to near all-time highs in some instances(see chart 8).1.01.21.41.61.82.02.21.21.41.61.822.22.42.6Jan-13 Feb-14 Mar-15 Apr-16 May-17 Jun-18US Core CPI,lhsUS Core PCE,rhs%YoY%YoY 7 Currencies Global May 2019 8.Equity and financial conditions have recovered-1.6-1.2-0.8-0.40.00.40.81.223002400250026002700280029003000Jan-18Mar-18May-18Jul-18Sep-18Nov-18Jan-19Mar-19May-19S&P 500,lhsUS financial condications ind,rhsLooserconditionsTighterconditions Source:Bloomberg,HSBC Our economists expect Fed policy to remain on hold in 2019,which suggests some modest upside risks for the USD given 20bp of easing is priced in by the market.However,the greater consideration remains the USDs healthy yield advantage over other G10 currencies with the carry allure especially attractive given the low level of FX volatility.Even if all central banks did nothing for the rest of the year,this would still be to the USDs advantage.Currencies Global May 2019 8 The FX market has been obsessed with interest rates,central bank guidance and dovish pivots this year.But the focus on the Fed and its friends overlooks an important structural driver now revealing itself in FX.A dig into the data shows that G10 FX has been strongly driven by manufacturing sector weakness.G10 FX performance in 2019 has been closely linked to the manufacturing malaise that started to rear its head last year but has clearly continued this year.Whether we consider the cyclical side of the story,or the longer-term structural nature of manufacturing weakness,it seems this sector could continue to weigh on those currencies exposed t