Archives of “Forex” category

rss

An ANZ ‘top trade’ for 2021 is for a stronger yuan – 3 key drivers of higher Asian currencies Thu 3 Dec 2020 23:23:25 GMT

  
Analysis, Forex

ANZ look for lower USD/CNH and, more generally, are bullish on Asian currencies for 2021

  • and it is not just because of a weaker dollar, though it helps.
There are three key drivers … a winning trifecta that will see Asian currencies appreciate further next year:
1. the region’s relative success in virus containment. 
  • This means when the global vaccine roll-out eventually begins, eradicating the virus can be achieved more quickly, thus allowing a faster normalisation of activity. 
2. the improved global growth prospects next year bodes well for Asian exports and the broader investor risk sentiment.
3. Asia should benefit from increased foreign investor allocation into the region, given ample global liquidity and a better growth outlook.
More specifically for the Chinese yuan:
  • forecast CNY to strengthen towards 6.30 by the end of 2021, on the back of factors such as strong growth momentum, the PBoC looking to exit unconventional easing, and strong inflows on the back of bond index inclusion. 
ANZ look for lower USD/CNH and, more generally, are bullish on Asian currencies for 2021 

Deutsche Bank the latest to forecast more misery for the dollar next year

  
Analysis, Forex

This adds to the growing chorus for a weaker dollar in 2021

USD
Deutsche releases its latest forecast for the euro and pound expecting EUR/USD at 1.3000 and GBP/USD at 1.4600 respectively by the end of next year.
There’s not much other details but I reckon it is a fair assumption that they are betting on dollar weakness being a key theme driving the moves. As for the pound, that is likely also contingent on the assumption that there is a Brexit deal in all likelihood.

Brexit: Hopes on both sides as the Brexit deal enters the tunnel

  
Analysis, Forex

Report from the Times Radio

Tom Newton Dunn of the Times Radio reports:
UK-EU trade deal talks have, at long last, entered the mythical tunnel. Michel Barnier has stopped internal debriefs to the wider EU, his last was on Friday. Hopes (on both sides) of a deal by the end of this week – but could still yet all fall apart
Big 70-pip jump in cable to 1.3426, the highest since Sept 1.
Report from the Times Radio

Dollar’s December doldrums

  
Analysis, Forex

Heads away for Christmas

The USD has strong reasons for USD weakness heading into year end.The USD tends to see outflows in December and inflows in January due to taxation issues. It is a pattern that has repeated itself over the last 50 years and you can see the outflows here in December below.

Heads away for Christmas 

In December large US companies move money to daughter companies to save taxes.In January the money comes back into the US. This pattern is solid and here is the seasonal outline over the last 25 years. So this would favour further falls in the DXY heading into year end. 

Dollar

EUR/USD: Likely to spend 2021 in a 1.20-1.30 range – SocGen

  
Analysis, Forex

EUR/USD up 24 pips to 1.1865

EUR/USD up 24 pips to 1.1865
Societe Generale discusses its outlook for EUR/USD for the coming year.“Relative real rates started to turn less negative for the EUR/USD in 2019, but the Fed has accelerated that development with its dramatic policy moves this year,” SocGen notes.“That should take EUR/USD into a 1.20-1.30 range during 2021, and eventually to a 1.25-1.35 range centred on where we see fair value – though fair value for EUR/USD will be predicated on the dollar losing ground against a lot more currencies than just the euro, and may have to wait for a broad-based rally in EMFX, which isn’t something we see happening just yet,” SocGen adds.Here are the latest SocGen FX forecasts, note the escalation in cable as well:SocGen FX forecasts

Morgan Stanley on the US dollar – lower in 2021

  
Analysis, Forex

Looking for USD weakness next year, especially against commodity currencies

  • See EUR/USD to 1.25 when the distribution of a COVID-19 vaccine or vaccines begins
  • Cable to 1.36 as Brexit resolved but then falling away
  • USD/JPY declining in 2021 but firming towards the end of next year as expectations of a Fed lift-off (in 2023) solidfy
  • AUD/USD to 0.77
  • NZD/USD to 0.74
  • USD/CAD to 1.23

Brexit: Rumours of a “temporary deal” in the works to be agreed this week

  
Analysis, Forex

Tweet by Dave Keating, Brussels correspondent for France 24

Brexit
I’m hearing rumours we may see an emergency “temporary #Brexit deal” agreed this week to avoid #NoDeal happening in midst of #COVID19. If this is true, it’s important to point out that this will *not* be a “deal”. It’s essentially an extension. The problem doesn’t go away.
Just something to take note. This could be what all the murmurs and whispers were referring to since the weekend.
It seems like this may allude to an agreement on the supposed 95% of the deal, with any agreement on the remaining 5% i.e. fisheries, governance, level playing field is likely to be postponed/extended pending further negotiations.
That brings us back to what I was referring to earlier in the day here:
Otherwise, we are likely to see the can kicked down the road again and I firmly believe that at the end of the day, both sides will fall back on some technicality to sell a compromise. A skinny deal excluding the three key outstanding issues (instead postponing them) will allow Boris Johnson to “technically” stick with a Brexit on 1 January 2021 while the EU doesn’t have to move its red lines and be made to look worse off from any deal.
Go to top