Forecasts of TMS Brokers analysts: What will be more expensive in 2021?

The new year is usually associated with price increases - inflation, tax and market. In 2021, some currencies will become more expensive, as well as related resources, and thus food and fuel. 

We have managed to get used to the fact that the new year is also connected with new taxes and inflationary increases for products and services. How will the new year look on the financial markets? Some commodities and currencies will become more expensive. Which and why? 

Raw Materials

The most commented rate hike concerns sugar. Putting aside the discussion on the so-called sugar tax, it is worth looking at the quotations of the raw material itself. They have rebounded since it crashed during the first COVID-19 wave, as a result sugar went up by 69 percent. from March to November.

In mid-November, the quotations were at the highest in 3 years, breaking the highs from February this year. There are different opinions on the market about the price forecasts in the near future. The International Sugar Organization (ISO) excluded the coronavirus pandemic from market-influencing factors in the early summer and predicted a strong deficit. Currently, ISO estimates that in the period 2020/2021 we will have a market shortage of 3,5 million tonnes.

- The size of the deficit can push prices up. Additionally - from a technical point of view - the quotations from mid-December started building another upward impulse. This will mean a rise in food prices, especially processed food - assesses Łukasz Zembik, department manager TMS Brokers.

The new mutation of the coronavirus has caused a panic in the market, causing investors to seek refuge in safe havens. Some investors chose precious metals, incl. for gold and silver. December ends for the precious metal about 5 percent. upward. Gold continues to rise at around $ 1957 an ounce. This - according to Bloomberg data - is a merit ETFswhich received 17,4 tons of ore - the most since September. In the case of the silver price, the December increase in the exchange rate is over 16%.

- The increases in metal prices are mostly influenced by inflation expectations in connection with the adoption by Congress of the anti-covid law package, including the law providing direct fiscal support for households worth USD 900 billion - explains Maciej Madej, TMS Brokers analyst.

Negative real interest rates will persist

On both sides of the Atlantic, real interest rates will remain negative, supporting investment in gold. Inflation trends are below expectations European Central Banktherefore, the asset purchase will continue on the Old Continent for a long time. If inflation rises from the current level of -0,3% and interest rates remain unchanged, then real rates will deepen their negative values. The growing potential of gold price growth is also evidenced by the forecast improvement in the jewelry market this year.

- The weakest jewelery demand for gold since 2009 should improve in 2021. We mainly expect a recovery of the Indian and Chinese markets, which collapsed during the coronavirus pandemic - says Łukasz Zembik, head of the analysis department at TMS Brokers.

Moreover, it should be remembered that the appreciation of the USD exchange rate put pressure on the bullion price. Thus, the weakening of the dollar index is giving commodities traded in USD a little breath. The support is used by copper.

Copper price close to the highs

The price of copper contracts is approaching the psychological limit of $ 8000 per ton. After the Christmas and New Year break, copper shows an appetite for further increases.

The dollar exchange rate will be the key factor for red metal prices in the coming days, and this will depend directly on the outcome of the US Senate elections.

- In the event of the victory of the two Republican candidates in Congress, the status quo will be maintained and the dollar will remain in a downward trend with the same dynamics. However, if the Senate is de facto taken over by Democrats, we will be dealing with the free implementation of Biden's expansionary fiscal policy, which will certainly not help the USD. In such a situation, the US currency will be under strong pressure, which will translate into an increase in the price of assets valued in USD. Investors on the copper market, which is in a good situation from the perspective of the environment, will most likely take advantage of this opportunity - Maciej Madej, TMS Brokers analyst assesses.

Metal, which is used in the production of cables and components for electrical devices, will certainly meet with great interest at the time of the energy transformation that we will witness in the coming years.

Crude oil benefits from rumors from OPEC +

Crude oil ended 2020 in a negative way. Despite the low down in April, the rate climbed nearly 650 percent. Despite this - the year closed about 22 percent on this market. under the dash. At the beginning of 2021, the price of crude oil is rising by 3,6%. - press agencies reported that OPEC + countries  have decided that Kazakhstan and Russia in February raise their daily production by a total of 75 thousand. barrels a day. To reduce world supply, Saudi Arabia decided to produce 1 million fewer barrels per day in February and March. This means a fairly large reduction in global black gold mining. The market reacted positively and the Brent crude oil price is rising by  over 6,5% 

Background for Monday-Tuesday arrangements  OPEC + is a stormy meeting in December, during which it was decided to give the opportunity to increase production, while agreeing on the terms of market monitoring, so as not to lead to a large oversupply of raw material.

The commencement of the vaccination process gave a lot of breath to investors in the crude oil market, because as the process progressed, the chance to ease the restrictions and increase the mobility of the society increases. Air traffic restrictions, which translate into lower fuel requirements, are a major blow to oil producers. Unfortunately, vaccination in most countries is slower than originally planned, but the market is clearly trying to ignore this information.

- Too quick loosening of the extraction restrictions will cause price drops. An overly cautious approach may result in further increases in the price of the raw material, and as a consequence, a breakdown and an increase in production on the American market may occur. We assume that the oil price in the first 6 months of the year should be under pressure, and the second half of the year may bring stabilization at higher levels, even around USD 60 / oz, which will translate into fuel prices - says Łukasz Zembik, head of the analysis department at TMS Brokers.

Currencies

The vaccine euphoria speaks in favor of very favorable conditions for emerging markets at the start of the new year. The zloty is cheap compared to its historical valuation, and the improvement in the economic outlook due to the decline in risks related to the pandemic and the pro-growth fiscal and monetary policy as well as the greater propensity of investors to take risks should allow the zloty to strengthen over the year. 

- A solid current account surplus will be a positive determinant, highly valued on global markets in 2021. We expect that global factors will determine the direction for the zloty to a greater extent. The continuation of the dollar weakening trend in the world markets will help, which, having the status of a safe harbor, will be less attractive in the era of growing risk appetite. At the end of 2021, we expect a decline in EUR / PLN to 4,32, USD / PLN to 3,40 and CHF / PLN to 3,86. - says Konrad Białas, chief economist of TMS Brokers.

According to the expert, next year promises to be without a premium for the risk of euro zone collapse. On the one hand, the Recovery Fund agreed in July removes concerns about the funding of post-pandemic reconstruction, but above all it proves the cooperation of Member States when it is most needed. 

- Any threats to solvency are mitigated by the powerful PEPP program, limiting the negative pressure on the currency. EUR should be appreciated and the ECB cannot quite counteract it. Further interest rate cuts are beyond discussion, the QE itself is too weak a tool to stem the appreciation - evaluates Białas.

The dollar is losing its attractiveness

Analysts agree that a more optimistic view of 2021 should result in further recovery from defensive positions in USD and diverting money into markets with the potential for faster growth. 

- Vaccine development and distribution is a strong signal to stimulate the appetite for risk, as containing the COVID-19 pandemic implies that the recovery is sustainable, inflation expectations rebound and real interest rates fall deeper than below zero. This phenomenon will be particularly harmful to the dollar, as the US offers the largest debt securities market, and therefore the greatest need for reallocation to more promising markets should arise there. With the Fed's declaration that the interest rate hike will not take place at least until the end of 2023, the dollar market will not regain interest attractiveness for a long time - assesses the chief economist of TMS Brokers.

The economic rebound in the euro area and the suppression of Brexit risks create arguments for a declining appetite for safe harbors and a weakening of the CHF. To counterbalance, the continued ECB monetary expansion in the form of asset purchases under the PEPP (at least EUR 750 billion in 2021-2022) will maintain the negative pressure on EUR / CHF (the main channel for assessing the perspectives of the franc). In addition, a trade surplus of approx. 9 percent. GDP will remain a force supporting the positive trend of the CHF in the long term. 

- Our forecasts assume a slow growth rate of EUR / CHF and only in the second half of 2021 we assume that the acceleration of global growth will gradually remove the appreciation pressure from the franc. At the end of 2021, we expect a decline in EUR / PLN to 4,32, USD / PLN to 3,40 and CHF / PLN to 3,86 - says Białas.