Expect downside surprise in dollar, upside surprise in oil prices: Analyst

Source: CNBC

 Much of the market is bullish about the U.S. dollar in the next year but the currency may well surprise on the downside, according to an analyst.
Oil prices, on the other hand, may bounce back as the current slump is largely due to the ongoing El Nino weather phenomenon that is causing a milder than usual winter, said Mark Jolley, equity strategist at CCB International Securities in Hong Kong.
"One of the things people are forgetting is that every single listed company that has U.S. dollar debt is paying down that debt at the moment so I think that's causing a lot of weakness in the currency," Jolley told CNBC's Squawk Box on Thursday.
The market is also factoring "too much" dollar strength, which may disappoint once crude oil show some upside, he said. Dollar-denominated commodities often move in the opposite direction to the greenback.


"One of the reasons why oil prices have been so weak is the weather. It also means that a lot of weakness we've seen in the oil price at the moment is seasonal; it's going to come out," he said.
"I think oil prices are bottoming here, I think oil stocks look interesting," added Jolley.

"If that happens (oil prices recover), the liquidity situation in energy markets is going to be quite favorable in the next six months," he said.
John Carey, portfolio manager at Pioneer Investments in Boston is also sanguine about oil prices.
'We see a little more upside potential than further downside risk. The drop in inventories caught a lot of people by surprise. Also I think the weather will turn colder early next year...There are some sign of re-acceleration in economy, perhaps in China and Europe. Here in U.S., things are pretty good so I think demand will hold up," Carey told CNBC's Street Signs.

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Oil prices are up Thursday during Asian hours after U.S. crude inventories fell 5.88 million barrels to 484.78 million barrels last week, the Energy Information Administration said Wednesday.
Both U.S. WTI and Brent crude oil are trading around $38 a barrel after falling around 40 percent this year.
CCB's Jolley is also more upbeat than most on the market next year and is bullish on both Chinese shares listed on the mainland as well as stocks listed in Hong Kong.
"There's a lot of pessimism around next year…I just don't see it panning out that way. Every week there are new stimulus measures coming out in China."