Nomura: in our view, the prevailing macroeconomic backdrop at the time is the main consideration, not supposed seasonality, which has been behind the run of falls in AUD in May. We look for AUD/USD to consolidate, but for AUD to underperform other key crosses, such as EUR/AUD.
Core scenario: Global reflation to get a boost from a recovery in consumption and investment as political risks ease in Europe. Trump’s tax cut plan is likely positive for ‘reflation’. Asia and Emerging Markets are benefitting from a rebound in global trade.
While our bullish stance on the USD/JPY since late-January has not materialized yet, we believe the medium-term upward trend in the USD/JPY has not ended. The JPY’s strength year-to-date looks overdone to us, and our team sees a high probability that tax reform will be implemented this year and the US-Japan policy divergence will deepen, widening US-Japan interest rate spreads.
The world has pulled out of recession and deflation zone, and is now likely growing at a steady pace, just below 3 %,but only 0.2 % above potential, with balanced risk. Global macro vol has fallen to a new record low.
BNP Paribas CLEER Forecasting Model. Definition of fair value: the exchange rate that corresponds with the current economic fundamentals. Duration of deviation: 6-18 months. Uses model based projections for exchange rates, scenario analysis based on economic variables.
The start of 2017 has turned out better than perhaps many initially feared for EM FX, with many recovering the losses sustained from late last year. There has been a growing sense of impatience within the FX market to identify fresh factors that can re-ignite USD strength. The softening stance on protectionist trade policies by the new US administration has also brought some relief to the currencies of the US’s major trade partners.
Economics Thinking No. 32 by UniCredit Research. The bottom line of this report: “While Mr. Trump might have a valid point in reducing tax pressure on American corporations, it would be much wiser to pursue some form of international policy coordination at the OECD level, to shelter tax revenues, avoid a “race to the bottom” and better regulate tax havens. However, this multilateral approach is miles away from Mr. Trump’s unilateral way of seeing the world.”
As a supplement to their 2017 Global Outlook, Credit Suisse market strategists have highlighted what they believe will be some of the top trades for financial markets in 2017. In this post we present the core views of Credit Suisse strategists for their markets and their preferred trades for the year ahead.
Barclays FX Thoughts for the Week Ahead – a report covering most important topics in FX space for the coming week (weekly events overview, trade of the week, data calendar).
Morgan Stanley FX Pulse weekly market research including the following chapters: FX Overview, Long-term JPY outlook, Strategic FX Portfolio Trade Recommendations, G10 and EM Currency Summaries, Global Event Risk Calendar, Macro forecasts and FX forecasts.