FXStreet – Imre Speizer, NZ Markets Strategist at Westpac, expects 2015 to be a fairly good road map for the year ahead, which should be characterised by high volatility. Key Quotes “The first few weeks of the year have demonstrated how volatile markets have become, with a backdrop of economic and policy uncertainty, unconventional monetary policies and lower risk warehousing capacity and we expect this to remain a hallmark of the year ahead. and ensure further bouts of risk aversion. United States Our 2016 outlook could be titled “Fed vs the World”, as this looks to be the key policy divergence which will influence markets over the year. We maintain our forecast of 4 Fed hikes in 2016 supported by firm payrolls and sound domestic demand outlook. That said there are substantial risks to the outlook and weak inflation remains the key variable in the policy puzzle. The current backdrop of slowing global growth, commodity weakness and deflationary impulse is clearly seeing markets question this outlook and the trajectory of Fed hikes. Looking forward, with yields at close to record lows it is hard to resist forecasting higher yields for 2016. Indeed we do expect yields to drift up over the year, but not until late in 2016. China China has clearly been a key driver of the recent weakness in global markets. Seemingly random fixes, intervention in both on and offshore markets and clear evidence of capital flight from the region have again undermined confidence. China is clearly key to the global and particularly Australian and NZ outlooks and there are a range of cyclical and structural difficulties to overcome. Our GDP forecasts, shown in the table right, indicate we expect slowing growth in China to remain in the headlines for some time. Recent weeks have highlighted that the administration’s policy response will be critical.” For more information, read our latest forex news.