Market and Policy Dislocations Could Peak in Q1 of 2015, Warns Saxo Bank

Hellerup, Denmark (ots/PRNewswire) -

The world is drastically out of synch both in terms of economic
and monetary policy going into 2015 and faces an unprecedented
cocktail of geopolitical risks. Expect markets to reach the point of
maximum dislocation as early as Q1 of 2015.

Saxo Bank, the online multi-asset trading and investment
specialist, has published its quarterly outlook for the global
markets and its key trading ideas for 2015.

The global economy and policy mix is about as out-of-synch as it
has ever been and we are faced with major geopolitical risks that
could deepen with the advent of sub-60 dollar oil prices, according
to Saxo Bank's latest outlook. Inflation is at multi-decade lows even
as monetary policy is extremely loose in most of the developed
economies and tight in emerging economies, with the US Federal
Reserve the lone developed economy central bank expected to begin a
tightening cycle soon - likely around mid-year. Meanwhile, credit
spreads trade below default rates and yields and volatility is still
near historic lows.

Balancing the global economy in 2015 will require countering the
slowdown in emerging markets, combatting deflation and confronting
rising debt to GDP ratios. Steen Jakobsen, Saxo Bank's Chief
Economist, says that eventually "the path of least resistance in 2015
is a lower dollar, stable to slightly higher energy prices and
unchanged interest rates." Though the point of maximum dislocation,
based on an extension of the trends we saw building in 2014, will be
seen in the first quarter, as the ECB risks making a terrible
decision by hitching its wagon to a new QE programme.

Currency markets will see considerable volatility in 2015. The
most likely trend is not so much a stronger US dollar but a weaker
dollar although Saxo Bank expects the greenback will continue to
strengthen in Q1 with the prospects of currency wars emerging,
particularly in Asia. Saxo Bank's key FX trade recommendations for Q1
2015 are to go long USD/CHF to position for possible punitive
negative rates from the Swiss National Bank in March. We're also
looking at selling the Chinese yuan versus the US dollar and
eventually against the Japanese yen to position for a possible
Chinese currency devaluation which could see China exporting
deflation to the rest of the world.

Saxo Bank expects the global economy to grow by 3% in 2015,
compared to 2.2% in 2014, driven by low energy prices, less austerity