2018 will likely be a year of strong global growth, around 3,9%. Eurozone GDP will grow by around 2,3% and central bank monetary policy will be only marginally less accommodating. Furthermore, the euro/dollar ratio will soon resume its upward trend, reaching around 1,25 at the end of next year. This is what we read in the latest forecast report by Unicredit research.
“We expect a 2018 of robust growth, higher yields and a stronger euro – says Erik Nielsen, group chief economist of Unicredit – With monetary policies of the main central banks only marginally less accommodative, we expect further hikes for riskier asset classes, eurozone equities and emerging markets in particular”.
According to the analysis, economic growth in the United States will enjoy a small boost generated by the planned tax reform in the short term, while the Fed is likely to increase interest rates three times over the next year. Unicredit Research expects US Treasuries to reach a yield of 2018% towards the end of 2,75.
The eurozone economy is expected to continue growing at a good pace throughout next year, with GDP growing at an annualized 2,3%, thereby continuing to reduce excess idle capacity and generating modest boost to core inflation.
However, headline inflation will remain below the ECB's target for the entire forecast horizon (2018 - 2019) and for this reason net purchases will probably continue until the end of 2018 and the forward guidance on interest rates will remain in place .
In this context, the Global Economic Outlook predicts that the yield on the 10-year Bund will close 2018 at around 0,80%, sandwiched between the upward push coming from the United States, the continuation of the ECB's purchases and the strong growth of the eurozone with low inflation.
As regards currencies, UniCredit Research estimates that the euro/dollar ratio will resume its upward trend, ending next year around the value that we estimate correct at 1,25.
Unicredit Research's forecasts for 2018 are based on the assumption that the recent increase in oil prices will continue for several more months, but that tensions in the Middle East will not cause supply shocks. As a result, the study predicts a gradual decline in oil prices starting next spring, down to a value of 55-60 dollars a barrel. The recent escalation of tensions between Saudi Arabia and Iran represents the single biggest near-term risk to such forecasts.
