Morgan Stanley: International trade will support the dollar

Many foreign exchange strategists are calling for a further weakness of the US dollar because of expectations of good growth in the global economy and signs that the world's leading central banks are increasingly confident in normalizing their monetary policies and raising interest rates.
Still, greenback has its own supporters. One of the last comes in the face of analysts from the investment bank Morgan Stanley.
The bank expects some force for the dollar to come in the direction of international trade.
International trade is expected to be the topic of this year, beyond interest rates, which will continue to actively engage investor moods.
Fed's rhetoric has changed since Donald Trump became president by making a protectionist turn.
The expectation is that the new reserve manager nominated by Trump will continue to pursue a weak dollar policy to help and stimulate the US economy.
Other currencies that are more prone to downward pressure include those who are dependable on a potential change in their countries' trade relations, such as the Canadian dollar and the British pound, Morgan Stanley said.

UBS raised the number of expected US interest rates hikes

The Swiss UBS updated its expectations regarding the number of Fed interest rises this year. Now the bank expects three rises in interest rates in 2018 in the world's largest economy. So far, they have forecasted only two increases.
In fact, most of market participants predict two increases in Fed interest rates this year.
According to UBS, however, there is less concern about the state of the US and the world economy, which will make the Fed much more aggressive in normalizing monetary policy and raising rates.
The rise in the price of oil and other major commodities is a major factor that UBS says will initiate an increase in inflation earlier this year. Oil is traded at around $65 a barrel currently.
However, according to experts, the number of Fed interest increases will largely depend on the decisions of other leading central banks around the world.
If the ECB and the Japanese Central Bank become more aggressive in their speeches and politics, it can also help for a more aggressive policy by the US reserve.
However, according to Charles Evans, the Fed leader in Chicago, the monetary policy committee should wait until the middle of this year before considering a new rate hike. Evans voted against the latest interest rate hike that happened in December.

Oil with correction risk after 13% growth

Oil prices returned earlier yesterday after analysts warned of a potential correction after a 13% increase in oil in the last month.
Despite the downturn, overall oil remained relatively stable in an environment of limited supply and strong global demand.
The Brent dropped below the $70 psychological limit and was trading early this morning at $69.30 a barrel.
On Monday, the raw material reached its highest value since December 2014, registering a level of 70.37 dollars a barrel.
Investors and analysts are now seriously debating whether the price of oil is high and reasonable. There is an increasing opinion that oil is overpriced and its 13% price would lead to a more serious correction.
US crude oil finished with a minimum decline of 5 cents to a level of 63.68 dollars a barrel. The oil also registered its highest value since December 2014, at $64.89 a barrel.
The oil price also includes a substantial geopolitical risk premium. However, if we see a reduction in tensions in the coming weeks, this may be another factor contributing to the start of a correction for oil.
In addition, US producers continue to increase their production in an environment of high oil prices. US production is expected to pass the psychological limit of 10 million barrels a day, with only Russia and Saudi Arabia acheiving such production.

Gold has recovered from its weekly minimum

Gold rose yesterday after it had reached its lowest value for nearly a week ago. The rise of the precious metal followed the drop of the dollar against other major currencies. Still, gold is headed to its first weekly decline in six weeks.
The spot price of gold added 0.1% to its value to a level of $1,328 per ounce. Earlier in the day, the metal reached the lowest value of $1,323.7 per ounce.
Gold futures with delivery in February declined by 0.8%, marking their worst performance since December 7, following the appreciation of the dollar at its three-year low.
For other precious metals, silver was traded at levels of $17.05 per ounce, while palladium lost 0.6 percent of its value to $1,108 an ounce.
Platinum added 0.3% to $1,000 per ounce.

Euro's jumping too high

There are risks of excessive euro appreciation, not due to a solid foundation. European regulators are in no hurry to change their stimulus policy.
They are worried about the sudden movements of the euro that do not correspondent to economic grounds. According to market observers, however, the ECB aim at one thing - to put pressure on the euro to fall.
The ECB does not approve of the appreciation of the euro, which makes European goods relatively more expensive on international markets and reduces their competitiveness.
The attempts of ECB heads to put pressure on euro over the past year was meaningless, as the single currency continued to rise, and the market accepted the motto "speaking is cheap."
The ECB faces new uncertainties about inflation expectations and rising oil prices. At the same time, strong economic growth is threatened by the appreciation of the euro.
The euro appreciated by 1.9% against the dollar since the beginning of the year and traded near its highest levels in three years. It fell 0.2% yesterday to levels of 1.2230.

GS: Correction but not end of the bullish market

The growth of stock markets, which leads them to new historical records, creates a risk of correction, but not for the end of the bullish market. At least such is the opinion of experts from Goldman Sachs Group Inc.
US indexes rose to new records, driven by optimism among investors, that tax reforms taken by the Trump administration will drive US companies' profits to their best growth for many years.
The GS reminded that MSCI World Index and MSCI Emerging Market Index are in their longest winning series, with no adjustment of 5 and 10%. Despite the danger of corrections, with a similar magnitude, however, we are unlikely to witness a bearish market.
For the bearish market, investors receive a top-level adjustment of more than 10%. The traditional bearish market, however, includes a decline of more than 15% of the peaks. In other words, according to analysts of the US Investment Bank, at this stage there are no symptoms of a drop of more than 10%.
The Fed and the rise in interest rates on the reserve are cited as the most likely cause of a potential correction of US indices.
In addition, almost all of the world's leading stock indices are in overpriced territory. In practice, almost no major index is in over-sold territory.
The GS are far more pessimistic in their ratings with respect to bonds. According to bank experts, bond markets are far more threatened by the potential policy of raising interest rates from the reserve.

Which are the most overbought markets?

Global stock markets experienced a great 2017th year. Growth, however, makes most of them look overpriced. In fact, according to Bespoke magazine statistics, only two markets are out of the super-territory.
Based on the study of 35 index funds based on the markets of individual countries and based on a significant excess of 50-day averages, only the markets of Sweden and Taiwan are not over-purchased. Neither country is over-sold.
Of course, the magazine recalls that being overbought, does not necessarily mean that it is a negative signal and is about to fall. This rather points to risky prospects and profitability prospects in the relevant markets.
Among the most overbought markets are the markets of Poland, Germany, Italy, Spain and the Netherlands.
The past year was exclusive to stock markets. The MSCI All-Country World Index rose in each of the months of the past year, which was the first time in history.
These growths contributed to an increase in market estimates to excessive levels.