The J.P.Morgan Team moves from positive to a neutral outlook on the USD this month, with the trade-weighted dollar currently trading above rate expectations, and further gives the year-end forecast for EUR, INR, MXN and BRL against the dollar.
Key Quotes
“Unchanged year-end targets include EUR/USD 1.10, USD/INR 65, USD/MXN 14.20 and USD/BRL 3.00.”
“The euro already prices significant ECB balance sheet expansion, according to our models, and sterling already prices in an extreme BoE scenario of no hikes until late 2016.”
“Our BRL forecast accounts for the currency's overvaluation relative to Brazil's poor fundamentals with respect to growth, fiscal trends and the current account.”
“We moved from positive to neutral on the USD this month although. Our forecasts still show a higher USD index into year-end.”
“Regardless of [..] strong payrolls print, our main short-term concern is that the trade-weighted dollar is trading so far above rate expectations (by 5%- 7%), particularly given stretched positioning and the risk that the Fed might officially delay tightening at the March or June meetings.”
“The risk of a self-fulfilling technical correction is thus not insignificant. This move would come primarily against the currencies of commodity importers where central banks are unlikely to ease more than what is currently discounted, so EUR, GBP, JPY, KRW and INR.”
Key Quotes
“Unchanged year-end targets include EUR/USD 1.10, USD/INR 65, USD/MXN 14.20 and USD/BRL 3.00.”
“The euro already prices significant ECB balance sheet expansion, according to our models, and sterling already prices in an extreme BoE scenario of no hikes until late 2016.”
“Our BRL forecast accounts for the currency's overvaluation relative to Brazil's poor fundamentals with respect to growth, fiscal trends and the current account.”
“We moved from positive to neutral on the USD this month although. Our forecasts still show a higher USD index into year-end.”
“Regardless of [..] strong payrolls print, our main short-term concern is that the trade-weighted dollar is trading so far above rate expectations (by 5%- 7%), particularly given stretched positioning and the risk that the Fed might officially delay tightening at the March or June meetings.”
“The risk of a self-fulfilling technical correction is thus not insignificant. This move would come primarily against the currencies of commodity importers where central banks are unlikely to ease more than what is currently discounted, so EUR, GBP, JPY, KRW and INR.”
