With 2017 already well under way, we’ve decided to share some important tips about what to look out for in the world of finance for this year. Our list of top five things to watch in 2017 will be crucial to monitor if you are at all involved in the world of forex, so be sure keep an eye on them.
- We expect the dollar to remain strong because it is predicted that the US will continue to grow financially and it is predicted that US interest rates will increase.
The election of Donald Trump as the US president means that there will be three very important policy shifts which will ultimately boost American private sector fixed investments. What are the three potential policy shifts?
- There will be a movement to deregulate business which means that it will be easier to do business.
- There will be large tax cuts which will include corporate tax cuts.
- There will also be significant fiscal expansion which will include an important raise in infrastructural activity.
If these policy shifts come into effect, they could potentially increase American fixed investment activity which would then also boost employment and economic growth. The policies would also encourage the Federal Reserve System (central banking system of the US) to fix interest rates. These changes could make the dollar even stronger. Currently, the dollar has even now been given too much value which is not necessarily a good thing for the US economy—President Trump has suggested that the dollar is already far too strong.
- It is predicted that the Euro will stay weak because there are quite a few European presidential elections taking place in 2017. Of course, there is quite a bit of uncertainty surrounding the various outcomes of these elections—especially that of the French election.
The European economy has improved significantly, especially in the major economies, and confidence levels have been raised because the Euro is weaker, although a lot does depend on the French election that will take place in May this year. It’s possible that the French might vote for a political party that wants to leave the European Union. This would mean that the European political model may begin to unravel which would then create quite a bit of uncertainty.
- Brexit might keep the Pound undervalued.
Although the British Prime Minister has shown that Britain will exit the European Union, it has also been indicated that Britain will continue to look for favourable agreements, including trade agreements, with Europe. Britain may have underestimated Europe’s willingness to continue to trade, and it is entirely possible that the rest of Europe might be unwilling to give Britain significant concessions. If Europe isn’t willing to trade with Britain, two things could happen. Firstly, the actual process of exiting the European Union could become substantially drawn out, and, secondly, the agreement that Britain might come to with the rest of Europe might not be particularly favourable. This could then keep the pound undervalued.
- Commodity prices will continue to be raised which will benefit emerging market currencies.
China has managed to restimulate its economy over the past year. It is predicted that, in the long-term, China will eventually want to restructure its economy to promote consumption and to promote the service industry. However, its short-term goal is to focus on fixed investment activity and industrial activity. This means that electricity consumption, railway usage, and various areas of manufacturing have significantly improved. In dollar terms, this has resulted in an increase of 20% in industrial commodity prices.
- There is potential for South Africa to be downgraded which would put the Rand under significant pressure.
Although South Africa’s economic growth is currently incredibly weak, it is predicted that it might improve marginally if three things happen. Firstly, there should be an improvement in agriculture now that the severe drought has finally come to an end. Secondly, the slowing food prices should lower inflation which means that consumers might be given some relief this year. Thirdly, we should also see an improvement in exports because of higher commodity prices. If these three things happen, South Africa should be able to avoid a credit rating downgrade, but only if the South African government can maintain fiscal discipline. 2017 is going to be a difficult year for South Africans both politically and financially speaking.
In short 2017 is going to be yet another interesting year for us. If you have any questions or need any advice on how to protect yourself from all these uncertainties please give us a call.
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