Focus of the day:
"We're expecting growth in 2014 for the US economy at least 2.5%, so clearly an improvement from the results of 2013. However, we also see that this is going to encourage the continuation of the great rotation out of bonds into equities and that will make another good year for the equity market and for emerging market investment but not particularly a good year for the dollar.
Despite equity's gains and despite strong economy, there are 3 factors that are undermining the dollar right now: the re-emergence of the carry trade, the diversification of China out of US dollar's reserves, and also the deficit of the balance of payment...
I would say the USD Index has gone a little too far; we're looking for 1.45 for EUR/USD by the end of year, 1.72 for cable, and 110 for USD/JPY...
I do share a lot of those upbeat sentiments regarding the euro. There are many weak points in the Euro Area but if you look at their balance of payment, you will see a lot of long term structural surpluses. You take a look at FDI and portfolio investment, they are also very sound. So, from a currency perspective, the euro has much more solid fundamentals on a trade-investment-flow basis than does the dollar at this point...
Favorite trades for 2014: euro and sterling higher against the yen."
Michael Wool folk, MD & Senior Currency Strategist at BNY Mellon
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