Credit Suisse: Exchange Rate Forecasts 2017, January
Analysts at Switezerland's Credit Suisse update clients on where they see major currencies going over the next twelve months.
Their latest foreign exchange update to clients focusses on the two 'political' currencies of the moment - the Pound and the Dollar.
The former is driven by the evolving Brexit landscape, while the latter is being driven by the potential for significant new policy announcements which will be made by the Trump administration this January.
Here are some snippets, as well as the full foreign exchange forecast table.
The US Dollar:
“For the USD, comments by president-elect Trump specifically referencing dollar valuation (saying "our currency is too strong. And it's killing us") are an important development."
“Related to this, we also note that Trump was lukewarm at best about the idea of border-adjusted taxation, calling it too complicated. These developments undermine USD bulls who have been encouraged until now by seemingly uniform USD-positive policy coming from the Trump team.
“To the extent that hopes for swift passage of legislation have driven higher US rates, any delay in the expected timeline can be interpreted on the margin as a drag on US rates and by extension on the greenback."
The Pound:
“While it's true that leaving the single market comes under the banner of a hard outcome, it's also the case that the promise of parliamentary votes and transitional deals can be taken as silver linings by those hoping for a more measured and less confrontational end outcome with relatively low market and economic volatility."
The Euro:
"We see no reason to change our view yet, although we are still inclined to wait for a further USD sell-off to re-establish longs for now rather than to go aggressively short.
"For example we can easily imagine EURUSD testing the December highs near 1.09 before resuming its downtrend towards our 1.03 3m target.
"A clean break above 1.09 would force us to reconsider more carefully our medium-term dollar view."
