www.research.hsbc.comDisclosures&Disclaimer:ThisreportmustbereadwiththedisclosuresandtheanalystcertificationsintheDisclosureappendix,andwiththeDisclaimer,whichformspartofit.CurrenciesGlobalApril2019By:HSBCFXStrategyCurrencyOutlookBrexitlonger,GBPstrongerThedelayofapotentialNoDealBrexitscenarioshouldseeGBP-USDmovehigher.ThepossibilityofaDealorNoBrexitoutcomeshouldbeassignedahigherprobabilitybythemarket.However,theriseinGBPmaytaketime.ConcernsaboutdomesticpoliticaluncertaintyandtheunderlyingfragilityoftheUKeconomymaylimitsomeoftheupside.AfiscalgamechangerforFXWehavebeencommittedUSDbullsforawhilenow,yetwearealwayslookingtochallengethatview.Thus,weaskwhatmighthappenifothercountriesfollowtheexampleoftheUSin2018andembarkonmajorfiscalexpansion.Webelieverobustfiscalstimuluswouldbepositiveforthecurrencyinquestion.1Currencies●GlobalApril2019Brexitlonger,GBPstronger(pg3)ThedelayofapotentialNoDealscenarioshouldseeGBP-USDmovehigher.ThemostnegativepotentialscenarioforGBPhasnowbeenstoppedinthenear-term,whilethemorepositiveGBPoutcomesofaDealorNoBrexitshouldbeassignedahigherprobabilitybythemarket.However,theriseinGBPmaytaketime.ConcernsaboutdomesticpoliticaluncertaintyandtheunderlyingfragilityoftheUKeconomymaylimitsomeoftheupsideforGBP.Wealsofeatureoureconomists’takeontheextensioninwhichtheyhighlighttheseeconomicweaknesses.AfiscalgamechangerforFX(pg10)WehavebeencommittedUSDbullsforawhilenow,yetwearealwayslookingtochallengethatview.InthispieceweaskwhatmighthappenifothercountriesfollowtheexampleoftheUSin2018andembarkonmajorfiscalexpansion.Fiscaleasingcarriescontradictoryimplicationsforacurrency:thecyclicalpositivesvsthestructuralnegatives.WesawfromtheUSDin2018thatcyclicalelementsturnedouttobedominant.Weseenoreasontoexpectthingswouldbedifferentwereothercountriestodeliverarobustfiscalstimulus.Thus,weretheretobesignificantfiscalexpansioninagiveneconomy,wewouldlikelybecomemoreoptimisticonthecurrencyinquestion.JPY:Taxingtimes(pg19)Japanisscheduledtohiketheconsumptiontaxon1October.Ifth...
