samedi 14 mars 2015
Week Ahead: FOMC, BoJ, RBA, Risk Of EUR/USD Squeeze
Posted on 01:51 by nice news
The surging USD has caught many by surprise with EUR/USD parity now seen as an achievable short-term target. Putting this surge into perspective, the USD TWI has risen almost 39% from its 2011 low with 22% of that gain since June 2014. Alarmingly, 8.5% of this move has occurred only this year. The US economy may be relatively self-sufficient, but a Terms of Trade deterioration of that magnitude is difficult to ignore.
The Fed must consider its next policy move in this environment. While we still think they will adjust forward guidance, latest USD strength has clearly complicated their decision and raised the risk of postponing any language change. EUR/USD could squeeze meaningfully on any surprise.
Beyond this correction, we continue to forecast EUR/USD weakness in the coming months. Thus having reached the 1.06 target on our EUR/USD short position earlier this week, we wait for better levels to re-initiate shorts.
What we’re watching:
USD: Fed Meeting – while we continue to look for a hawkish change in Fed language, a surging USD increases the risk of a dovish Fed surprise. Given extended short positioning, any EUR/USD squeeze could be significant.
GBP: UK earnings – wage price growth may have slowed regardless of further improving labour market conditions. However, we expect such an outcome to be only temporary.
JPY: BoJ Meeting – an extension of policymakers previously aggressive inflation targeting timeframes could weight on the currency.
AUD: RBA Mintues – next week’s minutes will confirm that additional policy easing remains on the cards maintaining pressure on the currency.
NOK: Norges Bank – despite expectations the Norges Bank may keep rates on hold to the benefit of the NOK.
The Fed must consider its next policy move in this environment. While we still think they will adjust forward guidance, latest USD strength has clearly complicated their decision and raised the risk of postponing any language change. EUR/USD could squeeze meaningfully on any surprise.
Beyond this correction, we continue to forecast EUR/USD weakness in the coming months. Thus having reached the 1.06 target on our EUR/USD short position earlier this week, we wait for better levels to re-initiate shorts.
What we’re watching:
USD: Fed Meeting – while we continue to look for a hawkish change in Fed language, a surging USD increases the risk of a dovish Fed surprise. Given extended short positioning, any EUR/USD squeeze could be significant.
GBP: UK earnings – wage price growth may have slowed regardless of further improving labour market conditions. However, we expect such an outcome to be only temporary.
JPY: BoJ Meeting – an extension of policymakers previously aggressive inflation targeting timeframes could weight on the currency.
AUD: RBA Mintues – next week’s minutes will confirm that additional policy easing remains on the cards maintaining pressure on the currency.
NOK: Norges Bank – despite expectations the Norges Bank may keep rates on hold to the benefit of the NOK.
Week Ahead: FOMC, BoJ, RBA, Risk Of EUR/USD Squeeze
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