Millennium Global has released a new Macro and Currency Outlook Webcast in which Head of Global Economic Research and Strategy, Claire Dissaux, presents her latest views.

Claire observes that the economic impact of the crisis is concentrated in the service sector. There will be a long-term hit to consumer confidence, and as a result she sees a weak growth recovery ahead. There will be permanent damage to employment which will be another headwind for the recovery. A credit crunch for corporates could fuel bankruptcies and a negative feedback loop for jobs.

Importantly, the ability of fiscal policy to underpin the recovery is uneven across developed markets. The mirror image is the expansion of central banks’ balance sheets, which is likely to be a key driver of currencies over the short run.

For currencies, the main implications are the following:

  1. Higher uncertainty associated with higher FX volatility.
  2. The expected near-term intense global disinflationary pressure will reinforce the attractiveness of safe haven currencies such as JPY and commodity currencies will be vulnerable, particularly AUD.
  3. Emerging market growth divergence is extreme. A number of EM high yielders are going through a fiscal crisis with lasting consequences (e.g. BRL, ZAR, MXN) while other cyclical economies are likely to see orderly currency depreciation as an adjustment to the global recession (e.g. KRW, CZK).
  4. Renewed economic and financial tensions between China and the US are likely to result in gradual CNY trade-weighted depreciation.

If you would like a copy of the macro and currency outlook document or have any other questions, please contact us at or via the “Contact“ page.