Euro Dollar Rate Forecasts for 2014-2015 - page 41
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US economic forecasters lower GDP estimates in latest Philly Fed survey Highlights of the Philly Fed forecaster survey
I'm not sure there's anything to take away from what these forecasters think.
When Will The USD Peak? - SocGen The FOMC will raise rates in December, unless put off by softer economic data, falling commodity prices, a strong dollar or emerging market volatility, while the ECB appears ready to ease further in the same month, notes SocGen.
"The dollar will continue to be supported for the next month by this prospect. What happens after that depends on how broader markets react. A negative risk reaction would see both yen and euro outperform the dollar.
Where and when the dollar peaks will depend more on how expectations about terminal Fed Funds evolve than what happens in December," SocGen argues.
That suggests the dollar’s peak is some way away – in late 2016 or early 2017," SocGen projects.
Week Ahead: If Long USD, What Are The Trades? The USD-rally has reached a stage where investors will look for signals from the policymakers and the data to decide whether to add to their longs at the current elevated levels. We remain constructive on USD but suspect that its outperformance should become less uniform across G10 in the coming days.
We see the biggest scope for USD-outperformance against risk-correlated and commodity G10 currencies. We think market risk sentiment should weaken from here as the December Fed lift-off draws near and global commodity prices remain under pressure.
At the same time, we expect liquid safe-haven currencies to remain relatively resilient. We think that EUR in particular could consolidate given that the latest selloff has pushed EUR NEER very close the ECB’s comfort zone and that Draghi will struggle to exceed the already dovish market expectations.
JPY could face upside risk in an environment of rising risk aversion. Although we expect the broader depreciation trend to continue, we believe better levels may be reached for entering new longs in USD/JPY.
What we’re watching:
EUR/USD outlook: steady grind lower but no parity. EUR NEER should go back to the ECB’s comfort zone (this year’s lows). EUR/USD at parity is not our base case, however. (for more details, see her).
USD – Unless next week’s inflation data were to surprise considerably lower, we anticipate limited impact on rate expectations and the currency.
EUR – Some upside correction risk cannot be excluded given markets have priced in both an extension of QE and a deposit rate cut.
GBP – Next week’s retail sales release is unlikely to make a case of rising rate expectations to the benefit of the currency. (for more on GBP's view & strategy, see here).
JPY – We remain of the view that the BoJ will not ease anew ahead of January. As such the JPY should be driven by risk sentiment.
XAU – Gold prices are likely to find a base on the back of more unstable risk sentiment. However, the still strong USD is likely to limit any upside.
Forex trades for the week ahead from Credit Agricole From a Credit Agricole client note:
The USD-rally has reached a stage where investors will look for signals from the policymakers and the data to decide whether to add to their longs at the current elevated levels. We remain constructive on USD but suspect that its outperformance should become less uniform across G10 in the coming days.
We see the biggest scope for USD-outperformance against risk-correlated and commodity G10 currencies. We think market risk sentiment should weaken from here as the December Fed lift-off draws near and global commodity prices remain under pressure.
At the same time, we expect liquid safe-haven currencies to remain relatively resilient. We think that EUR in particular could consolidate given that the latest selloff has pushed EUR NEER very close the ECB's comfort zone and that Draghi will struggle to exceed the already dovish market expectations.
JPY could face upside risk in an environment of rising risk aversion. Although we expect the broader depreciation trend to continue, we believe better levels may be reached for entering new longs in USD/JPY.
EUR: Does Draghi Know Something We Don't?
EUR: Does Draghi Know Something We Don’t?There have been a number of people questioning ECB President Draghi’s bias toward further easing, those questions have even come from others on the central bank’s Governing Council. With both headline and core CPI perking up recently, some wonder why he’s so certain that additional easing is necessary.
Does he know something we don’t? Not really. Core prices are perking up largely because of the precipitous drop in the level of the exchange rate with the USD. That means import prices have been buoyed by a one-time shift. The problem is that this type of support for prices is unsustainable. So, with underlying inflation likely barely a quarter of its target, it’s easy to see why Draghi is reloading his bazooka
If Short EUR/USD, What To Do Now? - UOB The sharp drop earlier this morning is gaining momentum rapidly and barring a break back above 1.0770, a move lower towards last week’s low near 1.0670/75 is likely, says UOB Group.
"While the bearish phase that started earlier this month is still intact, the current movement is quickly approaching oversold and the next major support at 1.0600 would not be easy to crack," UOB projects.
"In other words, those who are short may likely to book some profit near to 1.0600," UOB avises.
EUR/USD & Risk-Aversion: What's Going On? What's Next? - Nomura Last week, Nomura discussed its outlook for EUR/USD arguing that the pair could test 1.05 going into the FOMC December 16 meeting, and that it's finally realistic to project a move to parity within the next 3-9 month. Today, Nomura follows-up with a note on the current dynamics of the relation between EUR/USD and risk-aversion and what this means for the pair's price action and direction in the near-term.
"Obviously, we are facing a particularly sad version of this right now (given tragic events in Paris). Regardless, even before the events of Friday night, there was a break in the behavior or EURUSD versus risk assets. The Bloomberg chart below simply shows EURUR along with an inverted version of the S&P future.
Many of the spikes in EURUSD in recent months have coincided with risk aversion (S&P down, i.e. yellow line up), But over the last few sessions, we have seen a continued decline in EURUSD, despite the S&P dropping sharply," Nomura notes.
What is going on? Nomura provides a couple of possible explanations:
"1- The market may now view monetary policy divergence as so ‘set in stone’ that risk aversion matters less for monetary policy pricing and FX.
2- Repatriation flows, from EM and into the Eurozone may be slowing (after being sizeable during Q2-Q3). (This explanation fits with EM being more resilient to US led equity weakness too in recent sessions)," Nomura argues.
The bottom line "There are good reason to think that we can finally trade towards parity in EURUSD in coming months. If risk aversion cannot support the Euro, even temporarily, we can potentially get there faster," Nomura concludes.
The strategy: "We have added short EUR delta in the form of 6-months 1.02 digital puts last week, and continue to look for short opportunities in EURUSD spot," Nomura advises.
Stay Short EUR/USD - RBS "Dollar to rise further, with the Fed now highly likely to raise rates in December, just as the ECB strives to stay ahead of the policy easing consensus. Policy divergence lives.Stay short EUR/USD.
Credit Suisse Trade Of The Week: Sell EUR/USD Currency investors should consider selling EUR/USD this week, advises Credit Suisse in its weekly FX pick to clients.
"We continue to hold on a short EURUSD view heading into the December meetings for the FED and the ECB.
Minutes this week for both banks should provide a further argument for monetary policy divergence, in our view, with the FED likely sounding comfortable with a rate hike in the near future while the ECB's Accounts could provide some further insight into the possibility to cut rates further," CS says as a rationale behind this call.
US Preview: Consumer Price Data May Deflate Fed Hike Bets The Federal Reserve (Fed) is still far from having defeated its main foe just a month before policymakers' final meeting this year, which is widely expected to bring forth a highly eccentric decision by today's standards - an increase in short-term interest rates.
Clouding the outlook for the December 15/16 meeting of the bank's main rate-setting panel, the Federal Open Market Committee (FOMC), is an increasing threat that chronically low inflation mutates into outright deflation.
The president of the New York Fed district and permanent member of the FOMC William Dudley acknowledged he's having "greater concerns" about a lack of positive price growth, than about the broader economic outlook, even after growth slowed to just 1.5% in the third quarter.
Government data due to be released on Tuesday are expected to show the CPI rose just 0.1% over the year ending October. A collapse in oil prices that began last summer cut consumers' energy costs by nearly 20% over the past year and is mainly responsible for the gap between recent inflation readings and the Fed's 2% target. In addition, a surge in the dollar has lowered the cost of imported non-energy goods.
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