Yaser Faiz Rawashdeh, the associate director and head of Middle East client trading services at Saxo Bank, says a recovery in crude prices is not possible with a stronger US dollar and oil supply continuing to outweigh demand.
What asset class and geography are you focused on?
My focus is on foreign exchange – mostly the euro, US dollar, yen and sterling – and also gold, crude oil and major indexes such as the Dow Jones, S&P 500 and DAX.
What is the outlook for the month ahead?
I’m cautiously positive on indexes this month. I expect the DAX to break 10,000 and S&P 500 to remain bullish. The European Central Bank (ECB) could be coming out with a clear package on quantitative easing in their next meeting, which should support stocks, and continue to weaken the euro. The risks are still there, especially news from Greece and, or, Russia can spook markets. I also expect the yen to remain weak and possibly see new lows against thedollar. Stronger crude remains unlikely, especially if we see a stronger dollar and continue to see supply outweighing demand.
What are the main risks, either upside or downside, to the outlook?
Risk appetite will be key. And we need to watch the following:
Do we continue to get good reports out of the United States? Risk sentiment has been encouraged by a prospering US economy. The market is pricing in a possible Fed rate increase in late July, a move forward to earlier this year [would lead to faster appreciation of the dollar]. Does the ECB begin some form of quantitative easing? If they do, that could give indexes a lift and we could see new highs. How does the situation with the Russian currency and sanctions develop? The rouble has weakened excessively lately. Will that give further fear to the market, and will this impact Europe? Will Russia retaliate by selectively defaulting on their bonds? This could be the one of the most unpredictable risks this year. Greece’s election at the end of this month, which could see Syriza, a leftist party, form a government and renegotiate the country’s bailout deal. Recent comments from Syriza about wanting to remain in the euro zone have slightly comforted markets.
What is the best investment at the moment?
I would like the yen to weaken going forward. There is a strong belief that the efforts of the Japanese government to create inflationary pressure and growth will lead to further weakness in the yen. I’m looking for ¥130 against the dollar in the next six months to one year. The main risk to further weakness is if we get global risk-off appetite. Here the yen would most probably benefit as a safe haven. These moves could be quite quick and sharp and the yen could fall below ¥115 to the dollar. Were the yen to fall below ¥112 to ¥115 that would incentivise buying the dollar against the yen.
What was the best investment you were ever involved in?
The dollar strength that we have seen lately was a good call, against both the euro and the yen. October 31 was an extra-special day in dollar-yen, as we had been seeing signs of a possible continuation of dollar strength. That day the yen weakened by 3 per cent and fell another 8 per cent after that.
In October we had been watching the S&P 500 index closely. We were of the opinion that if 1,900 was broken on the downside in the S&P 500 then we could see some big moves, and this materialised.
What was the worst?
I could name a few but the one that comes to mind is Brent crude, which had a magic red line at $100 per barrel. And there was a lot of anticipation that whenever this was broken Opec would step in verbally to maintain price levels. This never happened. But we very quickly realised that the breaking of important levels meant it was going down further, so we saw opportunities to short crude.
abouyamourn@thenational.ae
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