Let’s have a contest. At the end of the coming quarter, I’ll send a ForexLive t-shirt to whoever comes up with the five best predictions — judged by me on a combination of accuracy, boldness and simplicity. Explanations not required but appreciated.
1. The US dollar will be the best performing currency
So far the big buck is the best performer year-to-date and the Year of the Dollar will continue in Q3. The Australian dollar will make a push back to 0.9800 midway through the quarter but it will fade.
Year-to-date FX returns versus USD
2. The pound will be the worst performing currency
This would have been an easier prediction two weeks ago when GBP/USD was at 1.57 but it’s still my best bet. Carney has a big ego and will want to make a splash at the BOE. Shortly after next week’s meeting he will hint at more QE and deliver at the August or September MPC, raising the stock of holdings to 450B. The yen is another candidate but that’s the obvious choice.
3. The Fed will not taper in September
About half of economists expect the Fed to begin tapering in September. They’re wrong. The US economy will continue to strengthen in Q3 but the Fed has set the bar too high. In fact, most of the economists will abandon the idea long before the Sept 17-18 FOMC meeting. As the taper tantrum ebbs, 10-year Treasury yields fall back to 2.20%.
4. The Nikkei will break the May high
I promised bold predictions and here’s one. The Nikkei will gain 14% to hit 16,000 before the end of September. Today’s data on May industrial production and June retail trades showed some signs of the animal spirits coming alive. The public endorsed the Abenomics agenda and companies will begin to take bold steps.
5. Gold won’t hit $1000 but it will hit $1060
The gold bubble is bursting right before our eyes. The paper traders are fleeing to the exits and companies will be rushing to hedge as they attempt to maintain profitability.
Disclaimer: This is for fun. Overall, I don’t like the idea of making predictions, even on a three month horizon. This is ForexLive, as the news comes in, the story changes and we change our minds. There are no bonus dollars to be made in markets for stubbornness. Act accordingly.
