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Helaba Research FX FOCUS 7 June 2017 US dollar AUTHOR Christian Apelt, CFA phone: +49 69/91 32-47 26 [email protected] EDITOR: Claudia Windt PUBLISHER: Dr. Gertrud R. Traud Chief Economist/ Head of Research Helaba Landesbank Hessen-Thüringen MAIN TOWER Neue Mainzer Str. 52-58 60311 Frankfurt am Main phone: +49 69/91 32-20 24 fax: +49 69/91 32-22 44 Most recently the US dollar depreciated noticeably, not only but especially against the euro. The British pound was similarly weak. By contrast, a few emerging market currencies like the South African rand gained ground. The US dollar has been tending toward weakness since the beginning of 2017. The initial Trump euphoria has subsided and has almost flipped into the opposite. And the US economy overall is not running smoothly, either. The Federal Reserve will therefore maintain its cautious course of interest rate hikes. The valuation of the Greenback remains high. The euro-dollar exchange rate should climb at times to as high as 1.15. However, the ECB is putting limits on the potential for appreciation. Helaba Currency Forecasts Performance on a month-over-month basis % vs. euro compared to the previous month (from 05/08 to 06/06/17) US dollar -3,1 Japanese yen 0,3 British pound -3,3 Swiss franc 0,6 Canadian dollar -1,4 Australian dollar -1,6 New Zealand dollar 0,7 Swedish krona -1,1 Norwegian krone -1,0 Czech koruna 1,3 Polish zloty 0,8 This publication was very carefully researched and prepared. However, it contains analyses and forecasts regarding current and future market conditions that are for informational purposes only. The data is based on sources that we consider reliable, though we cannot assume any responsibility for the sources being accurate, complete, and up-to-date. All statements in this publication are for informational purposes. They must not be taken as an offer or recommendation for investment decisions. Hungarian forint 1,0 Russian ruble -0,1 -1,2 Turkish new lira -1,2 South Korean won Chinese yuan -1,5 Indian rupee -2,8 2,9 South African rand Brazilian real -5,5 2,0 Mexican peso ■ Core currencies ■ Rest of G10 ■ Currencies of emerging markets Sources: Bloomberg, Helaba Research HELABA RESEARCH · 7 JUNE 2017· © HELABA 1 FX FOCUS US DOLLAR USD: Trump handicap The much-talked about dollar boom has not only been losing impetus for quite some time; in recent weeks it even reversed course. Since the beginning of the year, the euro-dollar exchange rate has climbed from 1.05 to nearly 1.13 most recently. One could almost think that some “deal” was struck between the US president and the German chancellor. While Trump has been saying for quite some time that the US dollar is too strong, Merkel recently mentioned that the euro is too weak. But currency markets don’t operate quite that simply. In times of flexible exchange rates, the heads of governments do not determine the rates, especially since some politicians in the euro zone, especially from the southern countries, hold very different opinions from Chancellor Merkel. Irrespective of the fact that formal responsibility lies with the US Treasury Secretary, politics influences the currency market de facto only indirectly. In general, the central banks play a larger role. Trump is not wrong The proposition that the euro is weak and the US dollar too strong contains more than a kernel of truth. On the basis of purchasing power parities or real exchange rate indexes, a historical comparison quickly arrives at the conclusion that the euro is clearly undervalued against the US dollar. This is also indicated by the current account balances of the two currency spheres. While the US is running a noticeable – though not extreme – deficit, the surplus in the euro zone is almost at a record level. However, Trump called only the German trade surplus “bad”. US dollar overvalued against the euro Euro zone with large current account surplus USD Net current account balance in % of GDP Sources: Macrobond, Helaba Research Sources: Macrobond, Helaba Research Dollar initially reacted positively to Trump % points President Trump clearly feels strongly about the US export industry, which is why he wants a weaker US dollar. After his victory in the election, the financial markets priced in a “reflation policy”. Thanks to higher government spending and massive tax cuts, growth and inflation should rise, and that would bring higher interest rates and a stronger dollar in their wake. Accordingly, the Greenback appreciated strongly. That was hardly to Trump’s liking. By now, the gains of the US currency have evaporated. So far, Trump has had difficulty finding majorities for his policies – as in the case of health care reform. The same should hold even more true for other schemes, especially since the Russia affair is weakening the government. The expansionary measures should be delayed, at the least. Apart from that, it is questionable at any rate whether the higher budget deficits this would entail would truly support the US currency. Past experiences would tend to argue otherwise. However, Trump is not the only explanation for the dollar depreciation this year. In the first quarter, the US economy posted only very modest growth at an annualized rate of 1.2 %, which was slower than the euro zone. Many other economic indicators – most recently even the previously robust labour market – tended to post negative surprises, in contrast to the euro zone. The US central bank has raised its key interest twice since last December, and a third hike is pending in June. HELABA RESEARCH · 7 JUNE 2017 · © HELABA 2 FX FOCUS US DOLLAR Overall, however, the Fed is maintaining its cautious course. Inflation has probably passed its peak for now, and the core rate (minus volatile energy) is also proving moderate. Economic momentum supports the euro USD US yield advantage vs euro waning difference in indexes USD Sources: Macrobond, Helaba Research Euro-dollar rate with limited potential % points Sources: Macrobond, Helaba Research Although US yields show an advantage against German Bunds, given the cautious stance of the Fed that advantage will hardly grow. Since the major political cliffs in Europe have been circumnavigated for now after the elections in France, there is more that argues in favour of the euro. The euro-dollar exchange rate should climb to as high as 1.15 in the coming months. Trump and Merkel can take pleasure in that, only Mario Draghi views the situation differently. With its hesitant and halting departure from its expansionary policy, the ECB will cap the potential of the euro, with the result that the euro appreciation will run out of steam. Helaba Currency Forecasts Performance year to date 1 month vs. Euro current* Q2/2017 Forecast horizon at end ... Q3/2017 Q4/2017 Q1/2018 (vs. Euro, %) US dollar -6,7 Japanese yen -0,3 0,3 123 121 121 115 120 British pound -2,3 -3,3 0,87 0,90 0,90 0,85 0,85 Swiss franc -1,2 0,6 1,08 1,08 1,10 1,10 1,10 Canadian dollar -6,9 -1,4 1,52 1,47 1,52 1,49 1,49 Australian dollar -2,8 -1,6 1,50 1,47 1,47 1,45 1,47 Swedish krona -2,0 -1,1 9,77 9,50 9,30 9,10 9,10 Norwegian krone -4,7 -1,0 9,54 9,30 9,10 8,90 8,90 Chinese yuan -4,2 -1,5 7,66 7,59 7,99 7,70 7,70 6,9 3,5 109 110 105 105 109 Swiss franc 5,9 3,8 0,96 0,98 0,96 1,00 1,00 Canadian dollar -0,1 1,8 1,35 1,34 1,32 1,35 1,35 Swedish krona 5,1 2,1 8,66 8,64 8,09 8,27 8,27 Norwegian krone 2,2 2,3 8,46 8,45 7,91 8,09 8,09 Chinese yuan 2,2 1,6 6,80 1,57 6,90 6,95 7,00 7,00 vs. US-Dollar Japanese yen US-Dollar vs. … -3,1 1,13 1,10 1,15 1,10 1,10 (vs. USD, %) (vs. USD, %) British pound 4,6 -0,2 1,29 1,22 1,28 1,29 1,29 Australian dollar 4,1 1,6 0,75 0,75 0,78 0,76 0,75 *06.06.2017 Sources: Bloomberg, Helaba Research HELABA RESEARCH · 7 JUNE 2017 · © HELABA 3 Unser Zeichen MT-457009 Ihr Ansprechpartner Volker Zednik [email protected] Telefondurchwahl 0 69 / 91 32 - 45 85 Telefaxdurchwahl 0 69 / 91 32 - 8 45 85 Datum 22.06.2017 Darstellung möglicher Interessenkonflikte bei der Weitergabe von Anlageempfehlungen („Finanzanalysen“) gem. § 34b WpHG und MAR Diese Publikation wurde weitergeleitet von der Landesbank Hessen-Thüringen. Dieses Institut unterliegt der Aufsicht der Europäischen Zentralbank und der Bundesanstalt für Finanzdienstleistungsaufsicht. Diese Publikation wurde erstmals am 07.06.2017 um 14:51 Uhr weitergegeben. Sie gibt die von dritten erstellten Anlageempfehlungen inhaltlich unverändert weiter. Die Helaba hat vor deren Weitergabe durch den Ersteller keinen Zugang zu diesen Publikationen. Bezogen auf Finanzinstrumente oder Emittenten, die direkt oder indirekt Gegenstand der jeweils weitergegebenen Anlageempfehlung sind, können folgende Interessenkonflikte der Helaba bzw. eines mit ihr verbundenen Unternehmens auftreten: 1. Die Helaba und mit ihr verbundene Unternehmen betreuen an einem Markt Finanzinstrumente, die selbst oder deren Emittenten Gegenstand der Anlageempfehlung sind, durch das Einstellen von Kauf- oder Verkaufsaufträgen. Betroffene Werte: B+S Banksysteme AG Villeroy & Boch AG Banco Bilbao Vizcaya Argentaria S.A. (BBVA) EnBW Energie BadenWürttemberg AG Fraport AG Frankfurt Airport Services Worldwide Postadresse 60297 Frankfurt am Main Hausadresse MAIN TOWER Neue Mainzer Straße 52 - 58 60311 Frankfurt am Main Telefon 0 69 / 91 32 - 01 Telefax 0 69 / 29 15 17 Internet www.helaba.de Bankleitzahl 500 500 00 SWIFT-Adresse HELA DE FF UST.-Id.-Nr. DE 114 104 159 Sitz Frankfurt am Main Erfurt Amtsgericht Frankfurt am Main, HRA 29821 Jena, HRA 102181 2. Die Helaba und mit ihr verbundene Unternehmen waren innerhalb der vorangegangenen zwölf Monate gegenüber dem Emittenten, der selbst oder dessen Finanzinstrumente Gegenstand der Anlageempfehlung sind, an eine Vereinbarung über die Erbringung von Wertpapierdienstleistungen mit dem Unternehmen gebunden. ABN AMRO Bank N.V. Landesbank Hessen-Thüringen Girozentrale Peugeot S.A. SEB AG -2- Banco Santander S.A. BNP Paribas S.A. Commerzbank AG Coöperatieve Rabobank U.A. Daimler AG Deutsche Lufthansa AG Deutsche Postbank AG Deutsche Telekom AG HeidelbergCement AG Hella KGaA Hueck & Co. ING-DiBa AG LafargeHolcim Ltd. Siemens AG Société Générale S.A. STADA Arzneimittel AG Swedbank AB Linde AG Merck KGaA Nordea Bank AB [publ] Orange S.A. thyssenkrupp AG UniCredit Bank AG Vattenfall AB Volkswagen AG 3. Die Helaba und mit ihr verbundene Unternehmen haben einen Handelsbestand in Aktien der folgenden Gesellschaft: Betroffene Werte: K+S Aktiengesellschaft METRO AG 4. Die Helaba und mit ihr verbundene Unternehmen handeln regelmäßig in Aktien der folgenden Gesellschaften. Betroffene Werte: Abbott Laboratories adidas AG Aetna Inc. Airbus SE GEA Group AG Gerresheimer AG GFT Technologies SE Gilead Sciences Inc. Akzo Nobel N.V. Hannover Rück SE Alimentation Couche-Tard Inc. Allianz SE Anheuser-Busch InBev S.A./N.V. ArcelorMittal S.A. ASML Holding N.V. AURELIUS Equity Opportunities SE & Co KGaA AXA S.A. Axel Springer SE Banco Bilbao Vizcaya Argentaria S.A. (BBVA) BASF SE HeidelbergCement AG Relx N.V. Rheinmetall AG RHÖN-KLINIKUM AG Robert Half International Inc. Royal Caribbean Cruises Ltd. Royal Dutch Shell PLC Henkel AG & Co. KGaA Henry Schein Inc. RTL Group S.A. RWE AG Hormel Foods Corp. H. & R. Block Inc. HUGO BOSS AG Sanofi S.A. SAP SE Sa Sa International Holdings Ltd. Infineon Technologies AG ING Groep N.V. Intercontinental Exchange Inc. International Petroleum Corp. JENOPTIK AG KION GROUP AG Shimano Inc. Siemens AG Silvercorp Metals Inc. Koninklijke Ahold Delhaize N.V. State Street Corp. Bayer AG Bayerische Motoren Werke AG BayWa AG Singapore Exchange Ltd. (SGX) Software AG STADA Arzneimittel AG -3- Bed Bath & Beyond Inc. Koninklijke DSM N.V. Beiersdorf AG Biogen Inc. Boozt AB Brambles Ltd. Canadian National Railway Co. Carrefour S.A. Centene Corp. Koninklijke Philips N.V. KRONES AG K+S Aktiengesellschaft KWS SAAT SE Lawson Inc. Coach Inc. Cognizant Technology Solutions Corp. Commerzbank AG Continental AG Covestro AG Daimler AG Deutsche Bank AG Deutsche Börse AG Deutsche EuroShop AG Deutsche Lufthansa AG Deutsche Post AG Deutsche Telekom AG Deutsche Wohnen AG ENEL S.p.A. E.ON SE Evonik Industries AG Fielmann AG Fortum Oyj Fraport AG Frankfurt Airport Services Worldwide freenet AG Fresenius Medical Care AG & Co. KGaA Fresenius SE & Co. KGaA Steinhoff International Holdings N.V. Südzucker AG Sysco Corp. Talanx AG technotrans AG Telefónica S.A. Linde AG LVMH Moët Hennessy Louis Vuitton SE McCormick & Co. Inc. McDonald's Corp. The Clorox Co. The Priceline Group Inc. Merck KGaA MTN Group Ltd. MTR Corporation Ltd. MTU Aero Engines AG Münchener RückversicherungsGesellschaft AG in München National Grid PLC Omnicom Group Inc. Orange S.A. OSRAM Licht AG Tokyo Electron Ltd. Total S.A. Toyota Industries Corp. Tractor Supply Co. TUI AG Otsuka Holdings Company Ltd. Packaging Corp. of America Paychex Inc. Perpetual Ltd. Peugeot S.A. Ping An Insurance [Group] Co. of China Ltd. Progressive Corp. [Ohio] ProSiebenSat.1 Media SE Qiagen N.V. Quest Diagnostics Inc. Ralph Lauren Corp. Mit freundlichen Grüßen Landesbank Hessen - Thüringen Compliance-Stelle thyssenkrupp AG TJX Companies Inc. Umicore S.A. Unilever N.V. United Internet AG United Overseas Bank Ltd. UPM Kymmene Corp. va-Q-tec AG VINCI S.A. VISA Inc. Vivendi S.A. Volkswagen AG Vonovia SE Walgreens Boots Alliance Inc. Yue Yuen Industrial [Holdings] Ltd. Zalando SE Zimmer Biomet Holdings Inc. Finanzgruppe Weitergabe von Anlageempfehlungen nach Art. 8 DVO1 hier: Offenlegung von Informationen und Interessenkonflikten Diese Publikation wurde Ihnen am 02.08.2017 überreicht von der Die Sparkasse unterliegt der Aufsicht der Europäischen Zentralbank und der Bundesanstalt für Finanzdienstleistungsaufsicht. Die Sparkasse gibt diese Publikation unverändert weiter. Sie hatte keinen Zugang zu der Publikation, bevor sie diese vom Ersteller oder einer anderen weitergebenden Stelle erhalten hat. 1 Delegierte Verordnung (EU) 2016/958 im Hinblick auf die technischen Regulierungsstandards für die technischen Modalitäten für die objektive Darstellung von Anlageempfehlungen oder anderen Informationen mit Empfehlungen oder Vorschlägen zu Anlagestrategien sowie für die Offenlegung bestimmter Interessen oder Anzeichen für Interessenkonflikte.