Amundi: “No need yet for a rate hike in the US”

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French asset manager Amundi, managing over €850bn of assets, has shared its views on the markets during a press conference in Paris.

Amundi’s CIO Pascal Blanqué has advised not being US centric and said “the actions engaged by the European central bank and the Bank of Japan are the most powerful today.”

“Today, we use exchanges rates to adjust relative prices,” he added, underlining that “investors should keep an eye on the international growth, securise their gains, pay attention to liquidity risk and be used to lower returns.”

Philippe Ithurbide, global head of Research, Analysis and Strategy at Amundi, commented on ECB’s quantitative easing : “The timing was good albeit late.”

Lately, James Kwok, CFA and head of Currency Management at Amundi, added that “the drop of the euro must continue in order to insure the efficiency of the QE.”

Fed’s possible rate hike has been discussed through the rise of the dollar. Kwok pointed out that “the US economy is considering interests rates more than exchange rates.

“The rise of the dollar does not penalise the US too much and reduces the need for a rate hike by the Fed,” he analysed.  Ithurbide even added there was “no need yet for a rate hike.”

Kwok has listed three factors that help to know if the rise of the dollar will stop.

The first one is the correlation of the dollar with the S&P 500 index. “If on a certain length we observe a rise of the dollar with, in the meantime, a decrease of the S&P 500, the US authorities might doubt of the benefits of a stronger dollar,” explained Kwok.

The behaviour of China remains the second factor to be considered. If China decides to enter the actual currencies war into devaluing the yuan, the US might take action. Kwok said “China would not take part to the currencies war”, which might not be the case of “the eurozone and countries such as Japan, Sweden, Switzerland or Czech Republic.”

The valuation of the dollar is the third factor Kwok looks at. A too expensive dollar for investors would stop its rise.

He also said Amundi would still buy dollar against others currencies. The firm’s analysts do not believe that the exchange rate between the euro and the dollar could go much further than one euro for one dollar.

 

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