全球外汇展望：美元峰值.docx

Error! Bookmark not defined. 7 9 12 14 17 19 20 22 26 31 44ContentsForecast SummaryUSD: Peak US dollar has arrivedCNY: On recovery trackEUR: Basing at lastAUD, NZD: The allure of unconventional measuresGBP: A relief rallyJPY: Rally on holdCAD: Rates Cuts Will Undermine the Loonie's Strength. EM FX Asia: A change of fortuneEMEA: The risk-reward weighing scalesLatin America: Will Politics Drive Performance in 2020? Detailed FX Forecasts TableFig 10 CNH vol curves have shifted lower - own protection at the back-end of the curve makes sense early in 2020Fig 11 China FX vols should be structurally higher as FX regime increasing shift to a more flexible float/oCNH vol curve,%5.84.84.61 m 2m 3m6m9mAt the money implied volsSource: Bloomberg, Macquarie Strategyiy 2y%CNY 1y implied vol against FX regime, %15.013.011.09.07.05.03.01.0-1.0Managed USDManagedpeg regimebasket regimeCNH vol curve has shifted downward in recent months. Long-end vols are at the lower end of their 4-year range, but skews are still well bid for calls. We think owning protection at the back-end of the vol curve makes sense in early 2020, especially if RMB gains we expect early in the year further drive down skews and vols from current levels.China's effort to open-up its financial market to foreign portfolio investors will make the RMB more susceptible to hot money flow. This combined with the governments desire to allow RMB to be more market determined should lead to a repricing of RMB vols structurally higher - approaching those of more flexible FX regime, such as KRW.The evolution of China FX regime is on-going. China vols were well below the basket-managed SGD vols pre 2015 when CNY FX regime was seen as a managed USD peg. Vols rose structurally from August 2015 to par with SGD vols after China made an explicit link of the CNY fix to the CFETS basket.Since the trade war broke down, China vols have traded above SGD vols. This may reflect a market premium for trade war, but also a policy realization that a flexible FX regime is best suited for China in an environment of high external stress.Gareth Berry+65 6601 0348Eimear Daly+44 20 3037 4802EUR: Basing at lastWe keep our rising EURUSD forecast profile, partly in anticipation of some mild USD weakness later in 2020 courtesy of the US political cycle.The Eurozone is well positioned to benefit from the mini-global growth upswing too, as the lagged effect of previous tariff imposition fades, and the prospect of a partial US-China trade deal boosts sentiment. Even the absence of further escalation represents progress of sorts.Owing to an open economy, the burden of escalating US-China tensions so far has fallen disproportionately on the Eurozone, despite the region not being a party to the dispute. The same logic should also hold in reverse as relations eventually thaw. A headwind could become a tailwind.Fig 12 Manufacturing mood needs a boostFig 13 Sensitivity to the external environmentEurozone PMIsApr-15 Apr-16 Apr-17Apr-18Apr-19Source: Bloomberg, Macquarie Strategy0Exports as a share of GDPSource: World Bank, Macquarie StrategySo although Eurozone PMIs are subdued now, they could turn soon, helped too by the avoidance of a hard Brexit. A negotiated ELI withdrawal deal means Europe's hard-pressed manufacturing sector should continue to enjoy unfettered access to a key export market, and their complex supply chains will be safeguarded for now at least.All of this should help EURUSD mount a tentative rebound, although an upswing may be delayed until the results of the UK general election on December 12th are announced. Until then, the FX technicals look too challenging.Also, the FX carry earned by EURUSD shorts is superior to the yield on a 30y UST; in a low yield world, thafs an important consideration.The speculative positioning picture does not argue for a sudden euro surge either. There is a legacy euro net short out there but it's not substantial. So a cascade of short-covering on any positive shock could only go so far before the propellant runs out.From a real-money flow perspective the latest indications suggest a base may be forming in EURUSD, but nothing more than that for now. Fixed income outflows from the Eurozone have essentially stopped, but equity inflows from abroad arc still nowhere to be seen. The latter is the missing ingredient, and its absence keeps our euro upside expectations in check.The market remains overweight US equities though. So anything that triggers an equity rebalancing out of the US and back into the Eurozone would force us to raise our EURUSD forecasts. Such a shock would have to originate inside the US though, and selectively cripple the US growth outlook. Outside of extreme US political developments, ifs hard to imagine what might realistically provide the spark.There is much talk of two possible wild-card outcomes that could theoretically trigger a sharp euro upswing, but we5re not convinced:(1) Eurozone fiscal stimulus would admittedly attract new equity inflows, boost PMIs, and drive bond yields higher. But even if it happens, it would be small in scale, and not a game-changer in our view. It is ironic that the countries keenest to launch stimulus (like Italy) are those with the least scope to do so. Meanwhile, Germany is likely to remain ideologically opposed to large-scale active stimulus outside of a deep recession scenario.(2) We don't hold out much hope for a hawkish policy reset at the ECB either, despite Lagarde's arrival as ECB President. Her promised policy review is likely to conclude that existing accommodative settings should be maintained. Even if the wisdom of negative interest rates is reconsidered, the same econometric models used to justify their introduction will probably be consulted again. We see no reason why the models should recommend a different course of action this time. The conclusion is likely to be that negative rates are a necessary evil, and must remain in place until inflationary pressures reappear.Gareth Berry+65 6601 0348AUD, NZD: The allure of unconventional measuresWe keep an upward bias in our AUD FX forecasts, reflecting the likelihood of a tentative upswing in global growth over the coming year. Our view still hinges on an eventual de-escalation in US- China trade tensions, which would boost CNY and drag AUD and NZD along for the ride.So a mild recovery in AUDUSD to 71c still seems likely over the next 6 months. But we lower our longer-term forecasts, to capture the risk of unconventional measures eventually being deployed by the RBA.To be clear, we doubt this w川 happen imminently. Australia's domestic economy appears to have reached a "gentle turning poinf, as RBA Gov Lowe puts it. We tend to agree, even if our growth forecasts are less optimistic (see page 71 here). The danger has passed for Australia's residential property market too.But if our expectations of another rate cut in February are realised, conventional firepower will soon be all but depleted. The next logical step could involve a foray into the unconventional arena, and the market is likely to start positioning for that well in advance.It is a mystery why AUD OIS pricing is still so benign as we go to print. Another rate cut is not even fully priced in until May, but crucially the risk of unconventional measures seems under- appreciated too.Fig 16 AUD OISFig 17 Australia's mortgage book differs from the USOlS-implied RBA Policy Rate TrajectoryShare of variable rate mortgagesSource: ABS, MBS, Macquarie Strategy() Mo-J 6B61olu m uo晅 s b sbUnconventional measures are likely to involve bond purchases and lending operations designed to inject liquidity into the banking system on very favourable terms. The corresponding build-up of excess liquidity in Exchange Settlement Accounts would naturally drive the OIS curve well below current levels, even if the cash rate officially remained at 50bp.We've seen this movie before, elsewhere. Under QE, the weight of excess central bank reserves forced the Fed and the Bank of Japan to abandon a point target for their overnight rates; instead they allowed the overnight rate to meander inside a range. Same goes for the ECB where EONIA decoupled from the refi rate; excess liquidity drove it lower towards the depo rate instead.So based on experience overseas, we must assume that receiving pressure on AUD OIS is likely to resume, unless the RBA follows Sweden's approach of sterilising the liquidity impact of QE purchases. The adverse FX implications of this for AUD are likely to be material, and should offset any strength seen on a US-China trade deal compromise.A weaker currency helps, but beyond the FX impact quantitative easing may be a less useful form of easing in an Australian context. Most of the bonds are in the belly, but most lending to the real economy is priced off the front end of the yield curve. The contrast with the US mortgage market says it all, where the 30y UST yield (rather than a BBSW/Libor alternative) is the key factor affecting mortgage pricing.There are fewer bonds outstanding too, imposing an upper limit on the size of any QE programme, although this constraint can be loosened by branching into semis - a move that seems likely to us.Fig 18 Limited supply (but more than in the past)ACC。nutctndiriHJan-06 Jan-09 Jan-12 Jan-15 Jan-18Source: Macquarie Rates Trading, Macquarie StrategyFig 19 QE could be expanded to include semis (in green)Equities mkt cap A$ BondsSource: AoFM, ASX, RBA, Bloomberg, Macquarie StrategyOn top of this, super-funds are not major holders of ACGBs, which means the portfolio rebalancing effect into riskier assets should be much milder than what was seen in the US for example.None of these limitations are arguments for inaction though. Beyond bond purchases, targeted liquidity provision to the banking system could drive bank funding costs much lower.Central bank liquidity is already supplied through RBA open market operations but there is scope for making the terms far more accommodating. Currently, repo and FX swap operations are limited in scale and tenor. On the repo side, we can imagine a future shift away from fixed-size auctions and towards what the ECB would call "full allotmenf, where banks, bids for central bank liquidity could be satisfied in full.Fig 20 RBA liquidity provision via repo (black line is a simulation that demonstrates short-term nature of lending)80 IStock of repo outstanding is short-datedFig 21 RBA liquidity provision via FX swaps5n FX swap operations are short-dated too70 -70 -60 -_50 -40 -4 30 -bilateral reverse repo20 -upcoming rev repo maturities10 -0 Nov-13May-15Nov-16May-18Nov-19-10Jan-04 Jan-08 Jan-12 Jan-16Source: RBA, Macquarie StrategySource: RBA, Macquarie StrategySource: RBA, Macquarie StrategyTenors could be stretched too. Currently roughly 3m money is the maximum available; by contrast, the ECB, the Bank of Japan, and the Bank of England have all supplied cash to the banking system for up to 4 years.Pricing could also be made extra-attractive, especially if banks could demonstrate that the benefits were being passed on to the real economy.If these measures are adopted and pushed to the limit, Australia's mortgage interest rates could fall another 100bp from current levels. Good for growth, but probably bad for the currency.For NZ, the policy trajectory is not dissimilar. Unconventional measures seem likely too eventually, but an AUDNZD breakout could occur in either direction depending on which central bank gets there first.There are two novelties as far as NZ policy is concerned, which could make the adverse FX effect on NZD more severe. First, Gov. Orr may have already selected negative interest rates his preferred tool if his televised interview at Jackson Hole is any guide. By contrast the RBA has described negative rates as "extraordinarily unlikely*4, and would lean towards other measures instead.Second, foreigners are major holders of NZGBs too, but foreign central banks are less prevalent than in the case of ACGBs. That means a QE programme in NZ is more likely to see participation from foreign bond holders, leaving NZD especially exposed as foreigners decide where to reinvest the proceeds.Gareth Berry+65 6601 0348Eimear Daly+44 20 3037 4802GBP: A relief rallyWe keep our upward-sloping forecast profile for sterling throughout 2020, but we no longer project a sharp dip around next month's December 12th general election.Previously, our fear had been that PM Johnson would fight the election on a hard no-deal Brexit platform, or at least that his manifesto would keep that option alive. The political incentive for doing so was clear: it would reduce the risk of losing seats to the Brexit Party, which favours a clean break with the ELI when the UK exits.If Johnson had failed to broadcast his Brexiteer credentials in this way, enough Brexit Party and DUP MPs might hold the balance of power afterwards. And the possibility of a negotiated settlement with Brussels would decline sharply. That was our fear.But two things have changed. First, after months of fruitless negotiations, a new Brexit withdrawal agreement has appeared out of the blue; Johnson wasn't so keen on a hard Brexit after all, it seems, despite all the rhetoric to the contrary.Second, the Brexit Party has failed to capitalise on Johnson's decision to cut a deal. The deal offers less than a 'pure' Brexit, and yet opinion polls indicate that support for the Brexit Party is dwindling not increasing. In the eyes of voters sympathetic to the Brexit cause, it seems that Johnson's deal will do, despite its imperfections.So the risk of a hard no-deal Brexit has materially receded. Whether sterling can build on recent gains will depend hugely on the outcome of the forthcoming general election on December 12th. But early signs are encouraging.Sterling would prefer a stable overall majority for PM Johnson5s Conservative Party. This is also our base case. Opinion polls show Conservative support is hovering around the magic 40% which, under the first-past-the-post electoral system, is usually enough to deliver an overall majority, although does not guarantee it.Such an outcome would be seen as a public endorsement of the new deal. There would be no more obstruction by an uncooperative parliament afterwards either. Following parliamentary ratification, the UK would leave the EU in a legal and political sense on (or even before) Jan 31st, when the new Article 50 deadline expires.But unlike the three previous cliff-edges, there would be no risk of an economic shock this time. Under the terms of the deal, bilateral t