G10 FX Weekly
Group Economics Macro & Financial Markets Research
Yen’s temporary recovery
Georgette Boele, + 31 20 629 7789
11 June 2015
Yen recovered only temporarily on Kuroda’s remarks… …while the euro has remained resilient for now… The Swedish krona rallies on higher inflation data
Yen’s temporary recovery
markets. The rise in 10y German bond yields was at a faster
Last Friday, USD/JPY approached 126 driven by the much-
pace than the rise in US Treasury yields and this supported
stronger-than-expected US employment report. However, at
EUR/USD. Recently, ECB’s Coeure said that the ECB won’t let
the start of this week the move lost momentum, as the US
sharp market movements threaten price stability. If movements
dollar was generally weak. On Wednesday morning Bank of
in financial markets continue to tighten financial conditions,
Japan chief Haruhiko Kuroda said in the parliament “the yen is
then the ECB will probably step up verbal intervention. It could
unlikely to weaken further in real effective terms if you think
eventually step up QE or announce a later QExit than
with common sense”. His comments had a considerable
September 2016 (see Global Daily Insight 11 June 2015, Five
impact. The yen strengthened by around 1.5%. Such a move
factors the ECB will watch). We expect ECB QE to weigh on
looks substantial. However, if the overall trend is taken into
the euro and expectations of a start of Fed rate hikes this year
account it is just a minor move.
to spark a substantial US dollar rally.
No turnaround in the yen trend
NZD falls sharply after RBNZ rate cut
Yen Trade Weighted Index
The RBNZ surprised financial markets by cutting key interest rates by 25bp to 3.25% and signaling another rate cut in the
140
coming months. As a result, the New Zealand dollar weakened 130
significantly. We expect NZD/USD to weaken further to 0.66 at
120
the end of this year.
110
Swedish krona rallies on higher inflation data
100
The Swedish krona rallied strongly after inflation data surprised
90
on the upside. Headline CPI yoy moved into positive territory 80 Jan 12
Jan 13
Jan 14
Jan 15
JPY TWI
again (0.1%). As a result, the probability of further monetary easing by the Riksbank this year has decreased. However, we judge it is too early to call the end of deflation. Since 2013,
Source: Bloomberg, ABN AMRO Group Economics
Swedish headline inflation has moved in a -0.65 to 0.25 range and it frequently moved above zero. The Riksbank will decide
As long as the former break-out level in USD/JPY (122)
on monetary policy on 2 July.
remains in place, we remain confident in the rally in USD/JPY will continue. Moreover, the direction in USD/JPY also heavily depends on the overall US dollar sentiment. The stronger-
ABN AMRO major currency forecasts 11-Jun 1.1263 123.45 139.03 1.5500 0.7266 0.9341 1.0521 0.7746 0.7024 1.2299 9.2605 8.7813
Q2 2015 1.10 122 134 1.55 0.71 0.95 1.05 0.78 0.73 1.23 9.50 8.25
Q3 2015 1.00 125 125 1.47 0.68 1.05 1.05 0.73 0.69 1.27 9.50 8.25
Q4 2015 1.00 128 128 1.49 0.67 1.05 1.05 0.72 0.68 1.30 9.50 8.00
Euro’s resilience
EUR/USD USD/JPY EUR/JPY GBP/USD EUR/GBP USD/CHF EUR/CHF AUD/USD NZD/USD USD/CAD EUR/SEK EUR/NOK
Despite the sharp sell-off in EUR/USD last Friday on the strong
Source: ABN AMRO Group Economics
than-expected US retail sales report has probably taken away doubts about the state of the US economy. Looking ahead, we expect USD/JPY to reach 135 next year, on the back of monetary policy divergence and yield divergence between the US and Japan.
US employment report, the euro recovered strongly this week. The usual suspect was again development in the bond
Q1 2016 1.05 130 137 1.52 0.69 1.00 1.05 0.70 0.66 1.31 9.50 8.00
Q2 2016 1.05 135 142 1.50 0.70 1.00 1.05 0.68 0.65 1.33 9.50 7.75
Q3 2016 1.10 135 149 1.51 0.73 0.95 1.05 0.67 0.64 1.34 9.50 7.50
Q4 2016 1.15 135 155 1.51 0.76 0.96 1.10 0.66 0.64 1.35 9.50 7.50