Luc Luyet

Luc Luyet

Do not hesitate to contact Pictet for an investment proposal. Please contact Zurich Office, the Geneva Office or one of 26 other offices world-wide. Luc Luyet has been working in the financial services industry for the last 12 years. For 8 years, he has been responsible for Technical Analysis for all asset classes and he was a member of a long only fund management team in one of the largest Private Banks in Switzerland and Europe.

Articles by Luc Luyet

Limited room for Swiss franc depreciation

Swiss Goods & Services, Investment and Reserve Assets

Even should global economic momentum stabilise in the coming months and political risks abate, the franc still has important structural underpinnings.The Swiss franc has been supported by a structural current account surplus and by reduced investment flows out of Switzerland since the 2008 financial crisis. In addition, the decline in global yields since the Fed’s dovish shift early this year has rendered interest rate differentials less unfavourable to the franc

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Euro slides against the dollar on ECB dovishness

EUR-USD and 10-year Real Rate Differential 2014-2019

The euro has declined further against the dollar but should strengthen over next 12 monthsThe euro fell to a 20-month low against the US dollar following the European Central Bank’s (ECB) March policy meeting, given the revised forward guidance that suggests that the interest rate differential is unlikely to provide much upside to the euro in the next few months.

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Gold to consolidate before further leg up

Gold Demand Breakdown 2000-2019

Some recent factors supporting gold are fading. However, while gold could sag in the short term, medium-term prospects look better.Last year ended on a very strong note for gold demand, with a significant increase in jewellery and investment demand in the fourth quarter (see chart), leading to strong price performance (7.7% in US dollar terms in Q4).

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Emerging market currencies: idiosyncratic risks strike back

EM Scorecard table, December 12, 2018

The environment will remain challenging for EM currencies next year.Despite a dovish shift by the Fed and the temporary truce in the US-Chinese trade dispute, the global environment remains challenging for emerging market (EM) currencies. In fact, our latestEM FX scorecard, which ranks 10 EM currencies according to key criteria such as growth and vulnerability to external shocks, is still unable to identify a single attractive EM currency among the 10 it monitors on a 12-month horizon.

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Further consolidation of EUR/USD rate likely

EUR/USD vs. GDP Growth Differential, 2000-2019

Short-term noise means we are neutral on the euro over the next three months, but see potential for its gradual appreciation against the dollar thereafterWe have long argued that growth and interest rate differentials are two key components for the direction of the US dollar. Both these drivers should continue to support the dollar over the short term.

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A trying time for euro

EUR/USD vs. EA - US growth differential as % (with AA&MR projections)

The euro has hit new lows against the US dollar. We are revising down our EUR/USD projections for the next few months.The euro broke to the downside from its tight trading range relative to the US dollar since the end of May. These new lows go against our expectations of a gradual appreciation of the single currency relative to the greenback in the second half of the year and indicate that we have underestimated the short-term risks related to the euro.As a consequence, we have lowered our projections for the EUR/USD rate.

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Swiss franc’s defensive features likely to come back into fashion

Purchasing power parity vs. REER deviation from long - term average

Despite heightened trade tensions, the Swiss franc has been relatively weak against the US dollar of late. The defensive features of the franc seem to be outweighed by an unsupportive interest rate differential. But the continuing threat of escalation in trade disputes and extreme short speculative positioning on the franc mean the latter has upside potential.

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Gold price to remain trendless

The recent strength of the US dollar coupled with the rise of the US 10-year Treasury yield has weighed on the price of gold and silver. Since 19 April, gold has lost roughly 2.3%, while silver lost almost 4.5% in USD terms.

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Euro weakness should prove temporary

Over the past 10 days, the euro has declined significantly against the US dollar. On 26 April, the EUR/USD rate moved below the low of its 1.21501.2550 trading range, which had been in place since 18 January. Reasons for this decline can be found in the growth differential and monetary policy divergence.

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Russian rouble: significantly undervalued but quite risky

On 6 April, the Trump Administration announced additional and more severe sanctions against Russia “in response to the totality of the Russian government’s ongoing and increasingly brazen pattern of malign activity around the world”. US sanctions target seven Russian oligarchs, 12 companies controlled by them, and 17 high-ranking government officials. The measures freeze any US assets held by those targeted and cut them off from US finance, trade and investment.

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British pound – Smoother transition, stronger sterling

Recent positive developments in the United Kingdom (UK), namely the transitional deal reached between the UK and the European Union (EU) on 20 March and the strong job market report on 21 March, call for a more positive short-term outlook for the sterling than previously thought. We therefore revise our projections upward for the sterling on the entire time horizon.

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Less scope for yen and Swiss franc depreciation

The start of the year has seen the Japanese yen and Swiss franc appreciate strongly against the US dollar (they rose by 5.6% and 4.4% respectively between 1 January and 22 February) despite higher US yields. However, this rise in US yields came with heightened market volatility, favouring safe haven currencies such as the yen and franc.

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Our emerging market currencies scorecard gives good marks to real and rouble

The scope of this note is to present a score card for Emerging Market (EM)currencies, designed to assess the attractiveness of a given currency over the coming 12 months. The scorecard (see chart), constructed using a rules – based methodology, suggests that the Russian rubble and the Brazilian real are currently among the most attractive EM currencies.

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