1Q 2012 Markets Outlook: The Year of Living Dangerously Begins
Risk sentiment remains behind the wheel
As we enter 2012, we expect investor risk sentiment to remain the principal driver of key markets' direction.
Global growth to remain fragile and uneven
Global growth in Q1 2012 is likely to remain fragile and uneven.
No end in sight for the EU debt crisis
The Eurozone debt crisis is about to enter its third year and the crisis seems to be snowballing.
Sovereigns and banks - the fi ght for funds
Going into 2012, both countries in the Eurozone and banks throughout the world are on the cusp of a potential credit crunch.
Prospects for new rounds of quantitative easing
With fresh fi scal stimulus unlikely to materialize in any of the G-10 economies in the quarters ahead, and as fi scal austerity measures increase the drag on recoveries, we think pressure will build on key central banks to provide additional monetary stimulus through quantitative easing.
Further SNB and BOJ intervention in the cards
Is it time to test the SNB's resolve? At the beginning of September the SNB reacted to signifi cant Franc strength by setting a fl oor in EUR/CHF at 1.20.
EM (Emerging Markets) FX - The search for relative value
With just under 15 trading days left for currency markets in 2011, the lack of clarity from yet another emergency EU summit on Dec. 8th, still elevated government bond yields in Europe's periphery, and potential ratings downgrades to AAA credit in the core may see EM FX remain under pressure as 2012 gets underway.
Unconventional tightening may see TRY outperform its EM peers
Despite relatively fi rm GDP growth of +8.2% y/y in the 3Q '11, negative current account imbalances (-4.2bln defi cit in October) alongside depleting currency reserves ($85.2bln as of 12.02.11) has seen the CBT (Turkey's central bank) resort to unconventional tightening measures - mainly liquidity management - to defend against excessive TRY weakness.
ZAR outlook may depend on advanced CB monetary policy measures
While near term risks for South Africa's Rand (ZAR) are certainly skewed to the downside, we think further deterioration in the global growth outlook may ultimately translate to medium term ZAR strength.
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