Weekly Economic Insights - 12 November 2018

Macro Highlights - 11/14/2018

Highlights of the week

Economist insights: In the US the Democrats won the majority in the House of Representatives, in China exports remained robust, in the UK GDP growth accelerated, and in Switzerland unemployment declined further

United States :

  • Midterms: the Democrats won the majority in the House, while the Republicans kept control of the Senate
  • Agreements could be reached on infrastructure and prescription drug prices

China :

  • Robust exports in October despite the increase in US trade tariffs
  • Economic growth should stabilise thanks to the government’s stimulus policy

United Kingdom :

  • Acceleration in GDP growth supported by exports and consumption
  • Weak growth in private investment in 2018 pending a Brexit deal

Switzerland :

  • The unemployment rate continued to decrease in October
  • But nominal wage growth should remain moderate for 2018

Focus Currencies: The euro/dollar trend since 2017 does not (totally) invalidate the foreign exchange market theory

  • Our analysis shows that the economic differential, i.e. both the interest rate and GDP growth differentials, remains the main factor driving the euro/dollar exchange rate trend
  • But the significant structural overvaluation of the US currency and the political risk in the eurozone also contribute to containing the appreciation potential of the two currencies
  • We conclude that the dollar could remain strong against the euro over the coming quarters, but that potential for further appreciation would be limited...
  • ...and that any rebound in the euro against the dollar in the medium term would remain contained, given the persistence of the political risk in the eurozone that we anticipate


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