2015—The Year of Normalization?

FX Street.com Trader Meet-up

October 2, 2014New York, NY

Brian DolanChief Market StrategistDriveWealth.com

2015—The Year of Normalization?

• IMF World Economic Outlook

• Macro Review of Major Economies

• Outlook for Key Central Bank Interest Rates

• Implications for Major Currencies

2015—The Year of Normalization?

IMF World Economic Outlook—July 2014“An Uneven Global Recovery Continues”

• 2014 global growth forecast cut from 3.7% to 3.4%; 2015 forecast steady at 4.0%

• Downside Risks Remain—global growth could be weaker for longer

• Advanced economies’ growth forecast at 1.8% 2014; 2.4% in 2015

2015: US 3.0%; UK 2.7%; Japan 1.1%; Eurozone 1.5%

• CPI in advanced economies forecast at 1.6% in 2014; 1.7% in 2015

• “Robust demand momentum has not yet emerged” in key advanced economies

2015—The Year of Normalization?

US Key Economic Drivers

• Jobs, Jobs, Jobs

• Wage Growth; hours worked

• Housing prices

• Inflation

• Leading Economic Indicators

2015—The Year of Normalization?

2015—The Year of Normalization?

2015—The Year of Normalization?

2015—The Year of Normalization?

2015—The Year of Normalization?

2015—The Year of Normalization?

2015—The Year of Normalization?

2015—The Year of Normalization?

2015—The Year of Normalization?

US Economic Takeaways

• Labor market slack persists; no meaningful improvement expected

• Wages stagnant relative to inflation; personal consumption remains subdued

• Housing prices have peaked; risk of return of housing debt issues

• Inflation remains non-existent

• Fed should remain lower for longer; hike less rather than more

2015—The Year of Normalization?

Eurozone Key Economic Drivers

• GDP

• Unemployment

• ZEW Expectations Survey

• CPI Inflation

2015—The Year of Normalization?

2015—The Year of Normalization?

2015—The Year of Normalization?

2015—The Year of Normalization?

2015—The Year of Normalization?

2015—The Year of Normalization?

Eurozone Economic Takeaways

• Recession looming; ECB too little, too late

• Risk of further headwinds from Russia & China

• Disinflation to persist; risk of deflation quite real

• ECB to struggle to pump up economy; will keep trying

2015—The Year of Normalization?

Japan Key Economic Drivers

• GDP

• Consumer Sentiment--Economy Watchers Survey

• Industrial Production

• Unemployment

• CPI

2015—The Year of Normalization?

2015—The Year of Normalization?

2015—The Year of Normalization?

2015—The Year of Normalization?

2015—The Year of Normalization?

2015—The Year of Normalization?

Japan Economic Takeaways

• Consumption-tax effects to diminish

• Inflation to remain below BOJ target

• BOJ may undertake yet another round of asset purchases

• Vulnerable to risks of a global slowdown

2015—The Year of Normalization?

China Key Economic Drivers

• GDP

• Exports/Imports

• Industrial Production

• Housing Prices

• Milk Prices??

2015—The Year of Normalization?

2015—The Year of Normalization?

2015—The Year of Normalization?

2015—The Year of Normalization?

2015—The Year of Normalization?

2015—The Year of Normalization?

2015—The Year of Normalization?

2015—The Year of Normalization?

China Economic Takeaways

• Growth continues to moderate; risk of <7% GDP

• Likely slow leak out of housing bubble; restrain consumer spending

• Additional government measures to rebalance economy

• Chinese data will continue to weigh on regional/global economies

2015—The Year of Normalization?

Major FX Outlooks

• Overall maintain a short-term trading bias

• USD—overbought near-term; risk of reversal; better overall among G10

• JPY—should remain weakest of G10; also oversold near-term; crosses

• GBP—Stronger on crosses; sideways to mildly higher vs. USD

• EUR—Worst likely priced in; potential rebound, then to 1.18-1.20