samedi 28 février 2015
Week Ahead: NFP, ECB, RBA, BoC, USD Sent Shift, Short EUR/USD
Posted on 00:52 by nice news
After a month of relative calm, this week’s USD surge in the wake of clarifying Fed testimony and unchanged core inflation is significant.
Coming ahead of next week’s February Nonfarm Payrolls, the move highlights that many investors are confident that they can now pre-empt the FOMC by extending their long USD exposure ahead of any perceived Fed policy changes. Importantly, this extension was not only against the troubled EUR, but across a broad range of the major currencies. If confirmed by a strong payrolls release, FX investors should therefore expect USD-funding to squeeze high yielding currencies and lift implied volatilities.
Given the looming US payrolls release we are more comfortable, not less, with our short EUR/USD position.
Beyond tis shift in USD sentiment, investors should also focus on the next round of peripheral central bank meetings.
Given the rebound in commodity prices, recent policy surprises from the BoC and RBA are unlikely to be repeated this week. Equally, it is too soon in our opinion for the RBNZ to cut rates given their recent move to a neutral policy stance.
What we’re watching:
US Nonfarm Payrolls – even more pivotal following Chairwoman Yellen’s clarifying testimony this week, another strong print on Friday could bring a June Fed move into play.
ECB – we expect slight growth and inflation projection upgrades to their longer-term forecasts. Draghi and the Governing Council also seem less likely to signal imminent action anytime soon. This should dampen enthusiasm for EUR-funded carry trades short-term.
BoC – latest Poloz comments may have decreased easing expectations, but weak domestic conditions argue policy makers have not reached the end of the easing cycle.
RBA – while a (small) majority are looking for another 0.25% easing, we think policy makers will be more patient. Even so, any post-RBA
Coming ahead of next week’s February Nonfarm Payrolls, the move highlights that many investors are confident that they can now pre-empt the FOMC by extending their long USD exposure ahead of any perceived Fed policy changes. Importantly, this extension was not only against the troubled EUR, but across a broad range of the major currencies. If confirmed by a strong payrolls release, FX investors should therefore expect USD-funding to squeeze high yielding currencies and lift implied volatilities.
Given the looming US payrolls release we are more comfortable, not less, with our short EUR/USD position.
Beyond tis shift in USD sentiment, investors should also focus on the next round of peripheral central bank meetings.
Given the rebound in commodity prices, recent policy surprises from the BoC and RBA are unlikely to be repeated this week. Equally, it is too soon in our opinion for the RBNZ to cut rates given their recent move to a neutral policy stance.
What we’re watching:
US Nonfarm Payrolls – even more pivotal following Chairwoman Yellen’s clarifying testimony this week, another strong print on Friday could bring a June Fed move into play.
ECB – we expect slight growth and inflation projection upgrades to their longer-term forecasts. Draghi and the Governing Council also seem less likely to signal imminent action anytime soon. This should dampen enthusiasm for EUR-funded carry trades short-term.
BoC – latest Poloz comments may have decreased easing expectations, but weak domestic conditions argue policy makers have not reached the end of the easing cycle.
RBA – while a (small) majority are looking for another 0.25% easing, we think policy makers will be more patient. Even so, any post-RBA
Week Ahead: NFP, ECB, RBA, BoC, USD Sent Shift, Short EUR/USD
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