G10 FX Weekly
Group Economics Macro & Financial Markets Research Georgette Boele, tel,+31 20 6297789 Roy Teo, +65 6597 8616
Dovish Fed weighs on dollar
17 September 2015 • •
Dovish Fed weighs on dollar… …but this decision does not alter our FX views
Financial turmoil puts FOMC on hold
early next year. If the Fed eventually hikes in December as we
After two days of meetings, the Fed kept rates on hold. The
expect, then the US dollar and yields should move up. The
FOMC statement showed that policymakers are concerned
EUR/USD should also be pushed down by a stepping up of
about recent global developments and the tightening of
ECB QE. Monetary policy divergence will remain a crucial
financial conditions and their impact on economic activity. However, the door was left open for a rate hike this year. We expect a rate hike in December as global risks should ease and the US economy should continue to recover.
driver going forward favouring the US dollar versus a large number of currencies including the euro, the yen, commodity and emerging market currencies. We judge that any move higher in the euro, the yen, commodity and emerging market currencies is temporary and an opportunity to position for weakness afterwards.
Dovish Fed weighs on dollar Markets were volatile following the decision, but overall
Commodity currencies recover
outcomes were supportive for bonds and gold, but negative for
During the past week, commodity currencies recovered, in line
the dollar, as markets scaled back rate hike expectations. Gold
with underlying physical commodity prices. Since August, dairy
prices moved higher, while the US dollar and 10y US Treasury
auction prices have rebounded by almost 50%, providing some
yields fell. At the end of the session US equities gave up their
support to the New Zealand dollar. Similarly, the Australian
gains and closed down for the day.
dollar was supported as iron ore prices remained firm and on domestic optimism that the new Prime Minister in Australia will
Dovish Fed weighs on dollar
implement business friendly reform measures to stimulate the
In %, with US dollar as basis
economy. We do not think recent gains will be sustained as we expect both the Reserve Bank of Australia and the Reserve
2
Bank of New Zealand to maintain an easing bias.
ABN AMRO major currency forecasts 1
0 AUD
GBP
CHF
EUR
SEK
NOK
CAD
NZD
JPY
Source: Bloomberg, ABN AMRO Group Economics
Did the FOMC decision alter our views? We are negative about emerging markets currencies, some more than others, depending on their commodity exposure, economic growth outlook, and political situation. Moreover, we are positive on the US dollar, negative on the euro, negative on the yen and negative on commodity currencies. Is today’s FOMC meeting resulting in a change our view. In short “no”. Because today’s FOMC decision is not changing the overall picture that the Fed will start its tightening cycle this year or
EUR/USD USD/JPY EUR/JPY GBP/USD EUR/GBP USD/CHF EUR/CHF AUD/USD NZD/USD USD/CAD EUR/SEK EUR/NOK EUR/DKK
17-Sep Q3 2015 Q4 2015 1.1393 1.10 1.00 120.33 123 128 137.10 135 128 1.5620 1.55 1.49 0.7294 0.71 0.67 0.9629 0.99 1.10 1.0970 1.09 1.10 0.7269 0.72 0.70 0.6435 0.65 0.63 1.3083 1.34 1.36 9.3202 9.50 9.50 9.1937 9.25 9.00 7.4608 7.46 7.46
Source: ABN AMRO Group Economics
Q1 2016 1.00 130 130 1.49 0.67 1.10 1.10 0.69 0.62 1.38 9.50 8.50 7.46
Q2 2016 1.05 135 142 1.52 0.69 1.07 1.12 0.67 0.6 1.41 9.50 8.25 7.46
Q3 2016 1.05 135 142 1.50 0.70 1.09 1.14 0.65 0.59 1.43 9.50 8.00 7.46
Q4 2016 1.10 135 149 1.49 0.74 1.05 1.15 0.64 0.58 1.45 9.50 8.00 7.46
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G10 FX Weekly - Dovish Fed weighs on dollar
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