4 Feb 2014
Flash: China remains the biggest downside risk - RBS
FXStreet (Bali) - According to Greg Gibbs, FX Trading Strategist at RBS, China continues to be the main downside risk for the global economy.
Key Quotes
"The global PMI data shows some stalling in recovery momentum. China remains the biggest downside risk with some evidence that tightening financial conditions may be detracting from growth."
"The weak US equity market in recent weeks has contributed to broader risk aversion, in contrast to last year. However, this is more likely to be a Q1 correction in over-bought US equities than a sustained down-turn. The weak US equity environment is likely to keep EM and commodity currencies heavy and weigh on those currencies that have rate hikes built in; this includes the NZD."
"Rate hikes to protect weak currencies will appear more growth threatening, and rates hikes to contain strong growth will appear less necessary. Over the longer term more resilient US asset prices should continue to support a broadly stronger USD."
Key Quotes
"The global PMI data shows some stalling in recovery momentum. China remains the biggest downside risk with some evidence that tightening financial conditions may be detracting from growth."
"The weak US equity market in recent weeks has contributed to broader risk aversion, in contrast to last year. However, this is more likely to be a Q1 correction in over-bought US equities than a sustained down-turn. The weak US equity environment is likely to keep EM and commodity currencies heavy and weigh on those currencies that have rate hikes built in; this includes the NZD."
"Rate hikes to protect weak currencies will appear more growth threatening, and rates hikes to contain strong growth will appear less necessary. Over the longer term more resilient US asset prices should continue to support a broadly stronger USD."