Master Select

Global payments company: GBP may benefit from elections due in the second half of the year

Global payments company Argentex says 2024 will be marked by further resilience for the pound and could benefit from elections due in the second half of the year.
In a research report setting out forecasts and scenario analysis, Joe Tuckey, head of foreign exchange analysis at Argentex, said that the 2024 elections in the United Kingdom and the United States will have a significant impact on the foreign exchange market.
"In the UK, Labor's indication that they will integrate more closely into Europe is seen as a potential positive for the pound," he said. "With a general election approaching, possibly in the autumn, certain sterling-positive themes may emerge and be priced in," he added.

For analysts, Trump's return could re-disturb the relative calm of the Biden era, and U.S. markets could become more volatile.
"Markets could become particularly concerned if Trump insists on withdrawing from NATO and withdrawing support for foreign wars, thereby putting more fiscal pressure on other economies," he explained.
Argentex's base-case GBP/USD forecast for 2024 suggests that the pound will continue to maintain its recent resilience, gradually rising as the dollar weakens.
The Bank of England will maintain a more dovish stance than the Fed, while economic data is likely to remain "flat" but in line with expectations for modest economic growth in 2024 of 0.5% to 1%.
"The UK will once again successfully avoid the annual doom and gloom narrative as falling interest rates, falling inflation and low unemployment continue to drag on the post-Brexit recovery," Tuckey said.
(Image source: Argentex)
Argentex's base case forecasts GBP/USD in a range of 1.30-1.33.
However, if inflation remains higher in the UK, which could mean the Bank of England cuts interest rates later and to a smaller extent than some other G10 central banks, then a bullish scenario of 1.35-1.37 could emerge.
A pessimistic scenario could lead to 1.18-1.20. This scenario could involve a major economic slowdown and a bond sell-off as markets question election-related fiscal changes.
Regarding the outlook for the GBP/EUR exchange rate, Argentex believes that the broad fundamental drivers in both countries are likely to remain similar, with growth expectations ranging from +0.5% to 1%.
(Image source: Argentex)
With deflation heading steadily toward 2%, the central bank is expected to cut interest rates through 2024. Economic data can be a complex picture, depending on employment, energy prices, consumer behavior and global demand themes.
"The Bank of England is leaning towards being less dovish and the ECB is likely to remain, while there could be an election rally later this year," Tuckey said.
Argentex expects GBP/EUR to trade in a range of 1.15-1.17, but if the 'sticky' inflation scenario mentioned above emerges, a bullish scenario of 1.18-1.19 is possible.
Another bullish scenario would see a new Labor government drive sterling higher amid "replacement" and "market-friendly" pricing, Tuckey said.
A pessimistic scenario would lead to 1.12-1.14 as the ECB is unable to deliver as many rate cuts as the market expects.
"The euro will strengthen as underperforming economies such as Germany start to outperform downturn expectations," Tuckey said.
可以向自己发送文件或转发消息

Analyst: Be cautious about the outlook for gold prices to “double and soar”, but it seems to be close to a phased bottom

Bob Moriarty, founder and analyst of a precious metals finance website, outlined his investment layout plan for 2024, emphasizing that the precious metals market has shown negative sentiment in the past three weeks. He called on investors to be cautious about the prospect of a doubling of gold prices, emphasizing that they will only become cheap when dramatic events occur in the financial system.

Bob agrees with the common view among many in the market that the U.S. domestic economy may enter a recession in 2024.

“The past three weeks have been negative for the gold and silver markets from a sentiment perspective. The signals are that we are close to a bottom, and I believe that to be true. But it is just a belief, and if it is true, Then there are a large number of junior miners who are about to explode higher," he said in his outlook.

He continued: “Have you ever heard the saying ‘prices are always right, opinions are often wrong’? It’s strange that so many gold cheerleaders, close to hundreds of them, are constantly talking about manipulation and suppression , they give investors the idea that somehow the price of silver/gold will double or triple overnight.”

"However, this is not true."

Bob explained to investors that if you carefully examine the price charts of nine different metals, including aluminum, iron, copper, nickel, zinc, gold and silver, you will find that gold and silver have performed best on most time frames over the past hundred years. Inside is rising.

He emphasized: "It is a fiction to say that gold and silver are cheap. They will only become cheap when something dramatic happens in the financial system."

"I believe that's actually going to happen, but that's what it takes to move gold and silver prices."

He also noted that contrarian investing can be crucial to successful speculation, and traders can mix sentiment indicators to identify key market turning points.

In addition to the gold market, Bob also mentioned the US stock market. He suggested that when the VIX volatility index approaches 10, the market needs to pay attention to the U.S. stock market below.

David Haggith, author of The Great Recession Blog, pointed out that every major U.S. bank's fourth-quarter 2023 report exceeded the threshold for one reason or another, helping stock investors find exit opportunities. As the yield curve begins to invert, people are noticing that recession risks are higher than thought.

"Banks collapse, inflation heats up and global warming freezes over faster than hell," he warned.

He made an important point about "why the Fed has made it clear that it has zero intention of cutting interest rates in March" and that all greedy investors are constantly daydreaming about the pivot, "I don't understand these circumstances over the past six months. , how that translates into a rate cut by the Fed in just over two months.”

2024 investment strategy: It is dangerous for the Federal Reserve to "boost" Biden's re-election! The US dollar may face “heavy pressure” in 2024

On Thursday (January 4), Peter Schiff, CEO and chief global strategist of Pacific Capital, issued a stern warning in his latest podcast: “2024 could be terrible for the dollar One year."

Peter explained: "In an environment where the dollar is so weak, there is no way that inflation will come down because that would really drive up commodity prices. That would drive up our trade deficit and put heavy pressure on the dollar."

Peter said this was a classic scenario where currency depreciation leads to domestic inflation. The trade deficit is not only a symptom of economic problems, but also a factor in the depreciation of the dollar. #

As long as the United States continues to run these deficits, pressure on the dollar will continue. Meanwhile, investors have flocked to other safe-haven assets such as the Swiss franc.

In 2023, the franc rose sharply by 10%: this is a very negative signal for the US dollar in 2024 and a positive signal for gold, because people are buying the Swiss franc as a safe haven. Gold is a safer haven than the Swiss franc, but the fact that the Swiss franc has appreciated so much against the US dollar shows skepticism towards the US dollar. "

Here are three reasons why Peter thinks inflation could rise further this year.

1. The Federal Reserve wants to help Biden be re-elected

The Fed is heavily influenced by political dynamics, and as the 2024 presidential election approaches, it is already taking actions to align with current politicians.

"I think the Fed will do everything it can to try to get Biden re-elected, and the Fed chair always wants to work with any administration that's in power," Peter said.

This has less to do with blatant political bias and more to do with self-preservation.

The president plays a decisive role in appointing the chairman of the Federal Reserve. Given this, Powell is motivated to prioritize monetary policies that could boost Biden's reelection. This is exactly what we saw.

The Federal Reserve has announced that it will significantly reduce interest rates from 2024 to 2025. The strategic timing is for this year's US election.

Peter predicts that the Fed will continue to pursue a dovish inflation policy through the end of this election year.

2. The “strength” of the U.S. economy depends on inflation

The perceived strength of the U.S. economy is largely illusory, the result of inflationary policies rather than real economic growth.

Peter explained that higher stock market indexes and other financial indicators in 2023 reflect investor expectations for inflationary stimulus from the Fed, rather than real economic progress: "Investors expect bonds to rise sharply. That's what they think. The Fed There will be a return to zero or close to zero quantitative easing. They are now betting that this easing cycle will be priced into the market.”

The Fed would rather keep monetary policy loose than ruin its bets on the broader economy and suffer a massive stock market crash. Congress would also rather keep the budget high than risk losing re-election.

This all drives up inflation, which Peter calls "their only magic trick."

3. Contribution to the U.S. trade deficit

Peter linked the dollar's weakness to the United States' recent large trade deficit. A weaker dollar would mean higher commodity prices and even an increase in the trade deficit, which in turn would further weaken the dollar.