Trader profile: Month ahead is all about US tapering, says ADS Securities strategist

Nour Eldeen Al Hammoury says a close watch must be kept on future economic data as this will be very influential in the Fed’s decision-making process.

Nour Eldeen Al-Hammoury, ADS Securities Market Strategist. The National

Name: Nour Eldeen Al Hammoury

Job title: Market strategist, ADS Securities

Number of years investing: 9

Where are you based: Abu Dhabi

What is the asset class and geography you are focused on?

Foreign exchange, equities, bonds and money market instruments

What is the outlook for the month ahead?

The month ahead for all the financial markets will all be about tapering and whether the United States Federal Reserve continues with its quantitative easing (QE) policies. The first announcement from its new vice chairman, Janet Yellen, earlier this month was very dovish.

She indicated that QE would continue until at least the first quarter of next year. In response to this the foreign-exchange markets have been relatively stable and we would look for the euro to gain against the US dollar heading towards the 1.40 mark.

I would also be bullish on the dollar versus yen, expecting this to push to the 103.7 level. At the moment, the equity markets appear to be over-bought but investors are still willing to buy especially as there is no sign of tapering any time soon and prices could go even higher. I am keeping out of this market as it is possible that Ms Yellen will surprise the markets and raise quantitative easing next year.

What are the main risks (either upside or downside) to the outlook?

The main risk for the time being is from economic data and how this will impact the Fed policy. As I have said, Ms Yellen was very dovish in her first testimony, which suggests that she cannot see a way of ending QE in the short term. In the new year, the Fed balance sheet will be above US$4 trillion and the question remains can they start tightening up money supply after such a massive amount after tapering? The issue of tapering may be easier to deal with than the issues which will be created when tapering stops. I think we will need to keep a very close watch on future economic data as this will be very influential in the Fed’s decision-making process.

What is the best investment at the moment?

Even though most analysts are saying that gold is not a safe haven any more, I think the opposite. Over the next couple of months with the uncertainty over the Fed’s policy and the problem of the equity bubble I believe that gold will remain the best safe haven. Gold could have already bottomed at $1,180 per ounce and we could be looking for a new record high in the coming months. I am also following the news from Beijing and the comments from Zhou Xiaochuan, the head of the People’s Bank of China. The renminbi [yuan] has already strengthened by 2.25 per cent against the dollar this year and if and when the PBOC stops direct intervention to keep the renminbi weak, there is significant potential for the currency to set new levels against the dollar.

What was the best investment you were involved in?

In 2008 during the financial crisis I bought gold, Citi stocks, sold British pound versus the dollar at 1.76 to 1.38 and the euro versus the dollar at 1.45 to 1.27. There was also very good profit from going long on Apple ($400) at the beginning of last year.

What was the worst?

Gold longs last year around $1,600, New Zealand dollar versus the US dollar longs around 0.83, Facebook after its initial public offering and RIM longs.