2016: A world of (gradual and cautious) policy divergence? – Investec

By FXStreet FXStreet (Delhi) – Research Team at Investec, explains that how monetary policy divergence will be a key theme for the global economy next year with the US looks set to see rate rises, albeit gradual ones.

Key Quotes

“Global

Monetary policy divergence will be a key theme for the global economy next year. The US looks set to see rate rises, albeit gradual ones. Other central banks, such as the Bank of England, are likely to follow the Fed’s lead. The Eurozone however, is set to remain on a stimulus footing, as will many emerging market economies, where growth prospects are rather soft. These dynamics could see; more downward pressure on the euro, further stress in some EM economies and on their currencies, and continued weakness in commodity prices. However, we think these forces will be kept largely in check next year – we actually see the euro rising, pressure on EMs abating, commodity prices recovering a little and global growth generally on a more even keel.

United States

The new focus in the US monetary policy debate should shift away from ‘lift off’ towards the pace of tightening, where the Fed will proceed with caution and clear communication to avoid a 1994-type situation when …read more

Source:: FX Street