Foreign exchange forecasts: The atmospherics around the USD have turned aggressively, 1.31 for EUR-USD seen
- Details
- Category: Exchange Rates
- Published on Monday, 10 September 2012 13:51
- Written by Rob Samson
The US dollar (Currency:USD) is on sale today as August payrolls data has cemented the case for FOMC action as soon as this week.
"A loose consensus is building around an extension of the extended period forward guidance from late-2014 to late-2015 and a flexible open-ended asset purchase program, probably MBS, at roughly the pace of previous purchases– around $60bn per month," says Richard Franulovich at Westpac.
"The atmospherics around the USD have turned aggressively. USD long positions have been cut sharply in recent weeks but the case for a sustainable rally is weak against the backdrop of easier Fed policy steps by the ECB to address tail risks," says Franulovich.
As such Westpac are forecasting EUR/USD near 1.31 with stretch targets of 1.33-1.34.
Over at Barclays the view of a falling euro dollar is also being anticipated.
"Our view, however, is that QE will weaken the USD more than we expected, but not enough to change the medium-term direction of our EUR/USD forecasts: we still expect it to weaken versus the USD over the next 12 months. We also expect a weaker depreciation of other low-yielding G10 currencies (EUR, GBP, JPY, CHF) versus the USD," says Guillermo Felices at Barclays.
Johnny Bo Jakobsen at Nordea Bank says:
If the Fed launches QE3, expect to see a weaker USD with EUR/USD moving towards 1.30 and a bounce in equities, while Treasury yields should initially decline and then rise as the programme unfolds, repeating the pattern of QE1 and QE2
Camilla Sutton at Scotiabank is less inclined to paint a bearish scenario for EUR/USD:
"Risks continue to loom large this week, but we would suggest the most significant event for EUR will be the FOMC meeting on Thursday. The average level of EUR on a ytd basis is 1.2810, very close to its current trading level, suggesting that the ECB and FED’s attempt to remove tail risk, crush volatility and support risk assets have been successful."
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