And How These Events Will Impact Major Currencies
2016 was characterized by volatility in the global markets due to concerns of a crisis in European banks, the results of the Brexit and its consequences, the referendum in Italy, the fascinating elections in USA and some concerns about an economic crisis in China.
All these events and many other factors as well affect the currency rates in a minor or a major manner, just like they did in 2016 in complete inverse correlation to the economic forecasts for that year. If you choose to register with foreign exchange providers, you will get real-time emails about these events as they happen.
What’s on the economic menu for 2017? Here are 10 financial predictions for the upcoming year.
2017’s World Financial Forecast
1. Brexit – One of the Major Events that Affects the Global Economy
According to PwC’s chief economist John Hawksworth and senior economist Barret Kupelian:
These Brexit pains are by far the biggest economic uncertainty in the UK in the next couple of months and the major event that affects economic predictions for 2017. The most significant event to come is the triggering of Article 50.
Obviously, the way Brexit will be executed will have an imminent impact on the British pound. The most popular pairings like the EUR/GBP and the GBP/USD can move in up to 15%, so it is necessary to keep up to date with the EUR/GBP and GBP/USD forecast for 2017.
2. Return of Godzilla – Japan is the Top Market
Andrew Sheets, chief cross-asset strategist at Morgan Stanley, says Japanese market is going to be:
It was also said that
Japanese economy had a sudden growth rate increase in the third quarter of 2016 to 2.2%. The important parameter is the rate of the JPY which got stronger in the first months of last year versus most major currencies, but now is trending weaker. The weak yen will encourage exports and tourism, support corporate profits, and encourage further increases in stock prices. We concur with these assumptions, and our economic forecasts for Japan in 2017 are glowingly positive.
3. Europe’s Political Changes
Looking forward, it is hard to be optimistic about Europe economy in 2017. The EU zone can be in a major problem when looking at economic growth. Many changes and a lot of adaptations are necessary to consider after the Brexit. Is the Euro strong enough to handle what’s coming in 2017?
Dr. Nariman Behravesh is Chief Economist of HIS states:
The 2017 EUR forecast is very hard to predict, but if we must make a punt one way or another, we agree with Dr. Behravesh.
4. Trump’s Administration
Forex forecast 2017 USD:
What everyone agrees on is that it may go one way or another. It’s either going back to the happy Reagan 80’s ultra-strong dollar, or going back to the 1930’s not-so-strong dollar. It is going to have an imminent impact on currencies worldwide including even the Israeli Shekel.
5. US Welcome Higher Growth
As a result of Trump’s election,
Private sector consumption almost definite to grow under these circumstances which will have inevitable impact on the dollar, world economy prediction experts say.
6. China Instability
China’s economic condition remains fragile at the end of 2016. The financial risks in this market are rising again. Most of the economic indicators point to a stability, but IMF warns that the rapid increase in the debt of the business section is increasing the chances to a financial crisis in the future. Moreover, USA and Trump’s new policy considering China, can cause a shock that will change the current delicate balance.
7. Is the Recession in Russia Coming to an End?
For many years, we are waiting for the Russian market to start showing signs of the end of the current recession and put an end to the dependence of this economy on its natural resources and especially the oil export. Focus Economics concluded their forecast for Russia’s economy:
8. Abundance of startups
The startup model has exploded in the past few years, and startups now are of major importance to the economy. But a study by Jorge Guzman and Scott Stern of MIT found that quantity may not be helping. Instead, it’s the quality that’s important, and too many startups can compromise their impact. They explain:
The abundance of startups can skew the data, leading to skepticism over the impact on the economy as a whole. Those financing startups may choose to withhold their layouts – on an international scale, this can lead to expected currency acquisitions not being met.
9. Millennial spending trends
Millennials are the generation born between 1981 to 1997. As such, they are the latest generation to become independent earners. But, burdened with student loans and born into an ever changing technological world, their spending habits are different than ever before. Deloitte University Press explains how this affects banks and other businesses, causing a shift in the driving factors of the economy:
Since digital services and shopping can be done internationally, the usual limits of corporations have been blurred. Currency from all over the world is moving freely between countries, adding complexity to the Forex markets.
10. Cyber-Attacks Can Be the Next Big Threat
When everything is done online in these days, it is only a matter of time until a major cyber-attack hit one of the major banks or financial institute, unless the governments will take action to prevent these kinds of attacks and will protect our most valuable assets. Paul Laudicina, a Contributor at Forbes mentions:
This is exactly why startups in the area of industrial cyber security are set up and are likely to trend throughout the year (view point 8).
Conclusion / Bottom Line
2017 is predicted to be one of the most volatile years in the last 20 years. Uncertainty, derived from rapid and drastic political changes, is the name of the game, and can have a substantial impact on the well-being of the world’s most leading economies. Although newly elected leaders like Trump or Theresa May come with great promises, 2017 might be the end of the globalization era and a full-fledged currency war can get in progress. Now might be a great time to make foreign currency exchange, or a large money transfer, if you need any, before currency rates may move against you.