Thursday, 23 February 2017

Argentine Peso 2017-2020


The big change in the official Peso rate happened at the end of 2015, although 2016 can hardly be said to have been great. And of course we are talking the official rate- with inflation at 40% who knows what the street rate might be. The main question for the next four years is surely is the Argentine Peso going the way of the Bolivar? And of course there is the secondary question as to how the expected financial events of 2019-20 will affect the currency.
January and February 2017 have actually seen some minor  improvement in the official rate. Although it is still lower than in October 2016 so we are not talking a significant change of sentiment. 
March to May sees a long term shift in the currency and perhaps the central bank.  The period is therefore interesting. There is some volatility coupled with continued inflation but there is also confusion over whether the currency has found its level. Yet all this is accompanied by a medium term phase that lasts until 2020 which is highly negative for the currency’s a value. The only question is has the currency found its  bottom already and will stay there until 2020 or are there significantly more falls to come?
June to August is a mixed period that carried on much of the themes above. There may be a short term turning point now but volatility as a whole seems reduced.
September and October are potentially better months – but there is unlikely to be much uplift just a sense of treading water.
November and December see the picture heightened again. Volatility returns though investor activity may be cautious so perhaps the volatility will be mild. A more significant turning point is reached now as the currency starts a new 12 year cycle. However the indicator referred to in January and February may override this.
January and February 2018 are moderately positive months for the currency, within the broader difficulties- indeed there is a tendency for values to overshoot.  There may however be constraints on trading which offset this.
March to May includes a very interesting indicator. A big shift in investor sentiment which may even be a major shock. Inflationary tendencies continue  in the same vein as in 2017. The mood of January and February is repeated but with perhaps a sort term turning point
June to August is a culmination of the themes to date. Indicators of the major bottom referred to in earl 2017 continue, as does the focus on inflation and the investor shake-up conditions.
This could be the most fundamental period of the 4 years for the currency.
September and October are similar though somewhat moderated. Again the positive mood of January and February recurs with another short term turning point. The matter of public debt is particularly important now and there may be interest rate adaptations.  
November and December is a more restrained period. Although a lot happens it is more likely to be at the granular level rather than major. Investors are cautious and trading conditions difficult so little movement is likely.
January and February 2019 are unlikely to be significant value wise. Some of the restrictions that characterised the end of 2018 continue and for the most part other indicators offset.
March to June is for the most part a positive time though investors may once again be destabilised. The inflationary environment remains unchanged.
July to September also sees a return to the longer term conditions that mirror the value trends of 2017-8.
Although it is a mixed time generally with little major trend, there is likely to be a focus on this currency now.
October and November, while not seeing a let up in the longer trends, so suggest a short term boost of some sorts. 
This continues into December. It is the last of the phase that started in 2016 and there is some optimism now. Although we aren’t looking at major rises, this might be a good time for the currency.
2020 is of course an interesting year for currencies anyway. But if January and February are indications of the year the focus will be elsewhere. Indeed there is a possibility that the currency could make big gains now. Certainly big movements in value are likely.
The position is accentuated in March to July, when caution is thrown to the wind by investors.
Although we are in generally a difficult time, and some off days are likely  I see this as been a generally highly positive for the currency.
August to September     is somewhat more moderated than the last few months but there is still a positive trend. Also noteworthy is the indication that a long term shake up the currency is on the cards- challenging long held perspectives.
October and November continue this and if anything accentuated any movements. All in all an interesting time.
December is also positive but quieter as things play out elsewhere. This might mean the new environment is heralded by a pull back at the year end, but overall 2020 could be the currency’s year.

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