Andrew Tilton, Research Analyst at Goldman Sachs, suggests that in 2016, markets seemed to price in, roughly in sequence, intensifying concerns about a) a sharp weakening in the RMB, b) a US recession, and c) European banking sector stress. Key Quotes “A tumultuous outset to 2016 saw Chinese equities sell off and the CNY weaken, the HKD move to the weak side of its trading band for the first time in years, markets abandon expectations of Fed hikes this year, the yen rally 7% in as many trading days and the Nikkei equity index fall nearly 20% despite a move to negative rates by the BOJ, and gold rally more than 10%, all in the first six weeks of the calendar year. Though risks exist in each of these areas, the speed and extent of the market moves was striking, perhaps exacerbated by a combination of large (sovereign?) sellers, less liquid markets, and fragile investor confidence. The fundamental views both of our macro teams globally and here in Asia haven’t changed much. There have been some marginal downward revisions to growth, with US Q1 growth now tracking at 2.1%, from a 2.25% estimate a month ago, and euro area Q4 growth coming in line with a slightly downwardrevised forecast. Our European team pulled forward their expectation of ECB easing (a 10bp depo rate cut and a QE extension until September 2017) to the March meeting, and we now expect the next Fed hike in June rather than March. In Asia, we have not made meaningful changes to growth views, though it is fair to say that recent activity data have been mixed at best: Japanese Q4 GDP was roughly in line with very low expectations at -1.4% (qoq annualized), and January trade data have been weak across the board. We still expect central bank rate cuts in Korea, Taiwan, and Thailand in coming months. Given the recent performance of many regional currencies, our unchanged forecasts now imply slightly more depreciation (USD strength) in coming months from current levels.” For more information, read our latest forex news.