摩根士丹利-全球-外汇策略-全球外汇脉搏：一系列风险-2019.2.15-33页.pdf

February 14,2019 09:03 PM GMTHans.RJames.LSheena.SGek.Teng.KFilip.DAndres.JDavid.S.AIoana.ZAndrew.WMin.DChun.Him.CBelle.CMORGAN STANLEY&CO.INTERNATIONAL PLCHans W RedekerSTRATEGIST+44 20 7425-2430James K LordSTRATEGIST+44 20 7677-3254Sheena ShahSTRATEGIST+44 20 7677-6457Gek Teng KhooSTRATEGIST+44 20 7425-3842Filip DenchevSTRATEGIST+44 20 7677-3166MORGAN STANLEY&CO.LLCAndres JaimeSTRATEGIST+1 212 296-5570David S.Adams,CFASTRATEGIST+1 212 761-1481Ioana ZamfirSTRATEGIST+1 212 761-4012Andrew M WatrousSTRATEGIST+1-212-761-5287MORGAN STANLEY ASIA LIMITEDMin DaiSTRATEGIST+852 2239-7983Chun Him CheungSTRATEGIST+852 2239-1261Belle ChangSTRATEGIST+852 3963-0668FX OverviewJPY and BoJ Rinban PurchasesStrategic FX Portfolio;G10&EM Currency SummaryCentral Bank Watch;Global Event Risk CalendarFX ForecastsCorrection:FX PulseCorrection:FX Pulse|Global GlobalA Bouquet of RisksWe have made corrections to the forecast table on page 29.This note was originallypublished on Feb 14,2019,and is being republished on Feb 15,2019.Pricing data anddisclosures reflect original publication date.To receive an electronic copy of theoriginal version of this publication please send an e-mail toEquity_Research_P with publication title and date.Markets appear complacent The market seems positioned for risk-on.A recentsurvey showed long EM is the most crowded trade for asset managers.The DailySentiment Index shows 78%of traders are bullish on the S&P 500 the highestlevel since September and our GRDI*is nearing+2.Cumulative IG inflows arethe highest YTD in 10 years.but the risk outlook is far from rosy:It may be Valentines Day,but things donot look rosy to us.The growth/inflation tradeoff increasingly favors the latteragainst the former a poor recipe for risk.The probability of an outright USearnings recession is rising,December retail sales data fell sharply,and US capexand activity data show signs of slowing.Meanwhile,price and wage pressurescontinue to build despite the 25%fall in oil prices.US core CPI rising 0.24%m/mis the fastest monthly pace in nearly a year.The market continues to price in cutsfrom the Fed despite firming inflation.Risk-bearish implications:Dovish central bank pricing and elevated risksentiment suggest one of three outcomes,all of which seem risk-bearish to us.Ifdata slow enough to justify outright rate cuts,risk assets look shaky.If data arefirm and financial conditions loose enough to justify this bullish risk sentiment,ahawkish Fed shift becomes more probable.Or perhaps risk sentiment is beingdriven by the dovish shift in rates itself.This suggests that only a Goldilockspattern of strong growth and low inflation can sustain the risk rally an unlikelyoutcome for a late-cycle economy.Trading:We are increasingly cautious and selective in EM while short INR andRUB.AUD and NZD shorts against JPY longs should benefit in a rising-rate,falling-equity world.We buy the dip in BRL.The BoC curve is underpriced(as isthe Fed curve)CAD longs should gain further.For important disclosures,refer to the Disclosure Section,located at the end of this report.1February 15,2019 05:45 PM GMTExhibit 1:Current trade portfolioActive OrdersEntryStopTargetShort USD/JPY107.92111.50102.00Short USD/CLP 3m NDF675670624Short SGD/CNH5.00005.07004.8500Short NZD/CAD0.90000.91900.8400Long EUR/CHF1.13001.12301.1700Short AUD 3m FWD/BRL 3m NDF2.69672.72002.5500Long USD/INR 3m NDF72.1871.0074.60Short AUD/JPY78.5080.0074.00Long USD/RUB66.5264.5068.50New OrdersSell USD/BRL 3m NDF3.82003.88003.6200Source:Strategic FX Portfolio Trade Recommendations for more details.Changes in stops/targets in bold italics.*Note:Global Risk DemandIndex US Pat.No.7,617,143.MS GRDI is a proprietary index of risk appetite2 FX OverviewDavid AdamsBottom line:Rising political uncertainty,concerns about the European growth outlookand ECB dovishness have weighed on European yields and kept the curve flat.EURUSDhas the highest correlation to European yields and the steepness of the yield curve.However,this correlation may break down in the event that European growth slowsmaterially.This is because many European economies have ample scope for fiscalpolicy to expand,which would erode its net savings and narrow the current accountsurplus by as much as 20%,all else equal.A narrowing current account surplus wouldlimit downside pressure on the currency,suggesting that EUR-bearish trades predicatedon a worsening growth outcome may not work out.EUR:Restrained but not contained.Investor concern about the European growthoutlook has increased as data continued to soften over 2018.This softness hasprompted our economists to revise their growth forecasts and pencil in a flatterexpected path for the ECB.This has prompted us to revise our expected path for EURmodestly lower(Exhibit 2).However,we remain bullish on EUR in the long term,as domestic growth and centralbank policy is only part of the story.In this weeks FX Overview we detail why netsavings may have a positive impact on EUR,even in a weaker domestic growthenvironment.EUR bears have plenty of justifications.Investors articulating reasons for EURweakness have numerous justifications.Economic growth in Europe has been slowingthroughout 2018 and various indicators including industrial production and PMIs havebeen suggesting sclerotic production growth.Indeed,manufacturing PMIs in Italy andGermany are now below 50 and concerns about outright recession in both economiespersist.from softening growth.European growth is diverging from the rest of the world too(Exhibit 3).Investors often cite structural and political concerns in Europe as well.Uncertainty over the future leadership of Germany and the ongoing tensions betweenthe Italian government and the European Commission continue.Brexit uncertainty alsopersists.Exhibit 2:Old and new Morgan Stanley FX forecastsSpot1Q192Q193Q194Q191Q202Q203Q204Q20NEWEUR/USD1.141.141.171.221.251.271.301.331.36OLD1.171.201.261.311.341.361.371.38NEWGBP/USD1.301.321.381.471.521.541.561.601.61OLD1.341.401.451.501.541.581.591.60NEWEUR/GBP0.880.860.850.830.820.820.830.830.84OLD0.870.860.870.870.870.860.860.86NEWEUR/CHF1.141.141.171.201.211.231.241.251.26OLD1.171.191.221.231.251.261.271.28NEWEUR/SEK10.4710.5010.7010.6010.3010.109.809.609.80OLD10.009.909.709.509.509.609.709.80Source:Morgan Stanley Research forecasts3.to political uncertainty.Economic and political uncertainty have prompted the ECBto turn more dovish.President Draghi formally acknowledged downside risks to theeconomic outlook and signaled a dovish tone.In response to softer data and dovishrhetoric,the market has priced the first 15bp rate hike by September 2020,compared tothe end of 3Q when the market priced in the first hike by October 2019(Exhibit 4).to a dovish central bank:Clearly the market is telling us an important story aboutexpectations for European growth.The combination of weak realized data and forward-looking uncertainty has prompted a shift in ECB rhetoric,and this cocktail has keptdownward pressure on European yields.Indeed,EURUSD has the strongest positive 3-month correlation to the German yield curve,both in nominal terms to the 10-year rateand curve steepness(Exhibit 5).A lower 10-year and a flatter curve would be consistentwith weaker growth expectations and disinflationary pressures.Indeed,the European 5-year,5-year forward inflation swap has diverged from the US inflation swap,which arenormally highly correlated(Exhibit 6).Slow growth does not guarantee a weaker currency:For our purposes,though,it isimportant to remember that currency correlations can change.In Exhibit 7 we graph therolling 3-month correlation since the financial crisis.Not only has the magnitude ofthese correlations changed considerably over time,but the direction has shifted manytimes too.This suggests to us that investors should not hang their hats on existingcorrelations and should instead focus on the underlying drivers of currency movements.Net savings matter:This is an important point weaker growth does not guarantee aweaker EUR.A robust positive relationship with domestic yield curve levels andsteepness might lead one to conclude that weak growth will keep EUR pinned,but weargue that this should not be taken as given.This is because the real driver of EURweakness has been the increase in net savings in Europe.Exhibit 3:Eurozone growth has underperformed the rest of the worldSource:Macrobond,Morgan Stanley ResearchExhibit 4:Markets have repriced the ECB rate path051015202530354045Jan-19Apr-19Jul-19Oct-19Jan-20Apr-20Jul-20Oct-20BPS9/28/20181/25/2019Market-implied ECB policy rateSource:Bloomberg,Morgan Stanley Research4What do we mean by net savings?Ultimately,an economy with a current accountsurplus is a net saver,or a net exporter of capital,and those with current accountdeficits are net borrowers from the rest of the world,or net importers of capital.This isbecause the current account and the financial account are two sides of the same coin.Apositive current account means inflows on the trade balance and income balance,so toensure the balance of payments balances,the financial account(assuming reservechanges is zero)is negative as financial outflows balance out the inflows.Capital exports largely explain previous EUR weakness.The eurozones currentaccount surplus was relatively balanced from 2002 until the European debt crisis.Itsmodest surplus in goods and services was balanced out by a deficit in secondary income(Exhibit 8).However,looking at the euro area data as a whole masks an importantdynamic within the euro area itself.The currency bloc saw northern Europe with itscurrent account surplus,predominantly Germany beginning in 2003-04,deploying itssavings to net importers of capital in southern Europe(Exhibit 9).It is only after theeurozone debt crisis as Southern Europe was deleveraging that we see the eurozonecurrent account in aggregate move into surplus as nearly all eurozone countries are netsavers.Exhibit 5:3m correlation of EURUSD to various macro factorsSource:Macrobond,Morgan Stanley ResearchExhibit 6:US and European inflation swaps are divergingSource:Macrobond,Morgan Stanley ResearchExhibit 7:The rolling 3m correlation between EURUSD and yield curvefactors varies considerably over timeSource:Macrobond,Morgan Stanley ResearchExhibit 8:Eurozone current account surplus is chiefly driven by highergoods net exportsSource:Macrobond,Morgan Stanley Research5.so rising investment.These net savings had nowhere to go.In additional todeleveraging from the debt crisis,the ECBs QE program reduced the attractiveness ofdomestic investment opportunities,forcing these savings to go searching for capitalabroad particularly in the US(Exhibit 10).It is no wonder that we see the eurozonecurrent account surplus correspond to the weakening in the currency against USD andCNH the weaker currency,coupled with falling oil prices boosting European terms oftrade,is what generated the goods surplus witnessed in the current account.or falling savings.Why is this important?Because the increase in net savings at homeis what led to currency weakness.We see this clearly in the correlation between EURand risk(Exhibit 11).Here we see that as Europes current account went into surplusfollowing the debt crisis,the correlation of EURUSD to risk(in this case the S&P 500index)began to move from positive to modestly negative between 2012 and 2016.Allelse equal,one would expect a weaker currency to support equities as it bolstersinflation and foreign revenue translation.The shift from positive to negative,in this case,suggests that a key factor keeping US risk appetite supported was the flow of fundsfrom Europe to the US.yield EUR strength:Taking all this together,it suggests that this process reversingwould lead to EURUSD increasing.We have often discussed how a worsening outlook inthe US could reverse this process,serving as a push factor bringing funds home andreversing the cycle discussed above.Long-term debt flows reduce the net savings ofEurope by reducing the current account surplus,particularly in goods,and leading to ahigher currency.Slowing growth means more fiscal spending.But there is another mechanism thatcould take place,namely a pull factor an increasing use of Europes net savings fordomestic capital purposes.Here we focus on fiscal policy.Why?Because there is amplescope for fiscal expansion in Northern Europe and fiscal policy tends to become moreexpansionary under weaker growth outcomes.This is because tax revenues tend to slowwith economic growth,while expenses rise via automatic stabilizers kicking in.This is akey mechanism by which EUR can rally if European growth slows.Exhibit 9:Nearly all eurozone countries currently run a currentaccount surplus(bn)Source:Macrobond,Morgan Stanley ResearchExhibit 10:European deleveraging drove higher net savings,in turndriving capital outflowsSource:Macrobond,Morgan Stanley Research6.which means more capital demand.Two key assumptions are important here.First,does Europe have scope for expansionary fiscal policy?And,if so,will it deploy it?Forthe former we look at the euro area structural primary balance as a whole and examineit at a country level.Exhibit 12 shows the euro areas structural primary balance overtime and our economists forecasts.Since the European debt crisis,the fiscal impulseand structural balance have moved tighter as European savings increased anddeleveraging kicked in,though this has been weakening and is likely to further soften.reducing net savings:Looking at a country-specific level,we apply our economistsforecasts for the government balance over 2019.From here,we estimate what theadditional fiscal spending would be assuming every economy expanded fiscal policy toreach the 3%limit as established in the Excessive Deficit Procedure(Exhibit 13).Usingthese figures for the 10 largest eurozone economies,we find that approximately 60billion in additional spending could be applied in 2019,with another 72 billion inavailable fiscal capacity in 2020.These figures are arguably conservative as many othersmaller economies such as Finland also have deficits well the-3%limit.Of course,theStability and Growth Pact applies not only to deficits but also to debt stocks,soinformation from the European Commission about its ability to tolerate a temporarydebt stock increase would be important.Exhibit 11:EURUSD correlation with risk turned from positive tonegative as the current account surplus roseSource:Macrobond,Morgan Stanley ResearchExhibit 12:Historical and forecast fiscal impulse and primarybalanceSource:Morgan Stanley ResearchExhibit 13:Additional fiscal spending of 60-70 billion available ineurozone countries-2bn1bn 13bn 2bn2bn1bn2bn1bn32bn 8bn-4.0%-3.0%-2.0%-1.0%0.0%1.0%2.0%FRITESBEAUPOIEGRDENLDeficit%of GDP61bn in fiscal scope in 2019E if allcountries reach the 3%EDP levelSource:Macrobond,Morgan Stanley ResearchExhibit 14:European issuance has been front-loaded,particularly inthe periphery0%5%10%15%20%25%30%FINAUT NETH FRA GERITASPABELIREPOR