Group Economics
G10 FX Weekly
Macro & Financial Markets Research Georgette Boele, tel,+31 20 6297789 Roy Teo, tel, +65 6597 8616
USD & commodity FX lower
20 August 2015 • • • •
Expectations of a later Fed hike weigh on US dollar… …but we remain US dollar bullish Commodity price weakness weighs on commodity currencies …but a recovery in NZD as dairy auction price rose
Expectations of a later Fed hike weigh on US dollar
Further weakness in business capital expenditure
The sentiment towards the US dollar has been deteriorating
We expect business investment plans in Australia to remain
despite the better-than-expected housing market data this
weak in the second quarter (27 August Q2 print). Investment
week. The main trigger was the release of yesterday’s US
plans in the next year are also expected to deteriorate due to
inflation report. This showed a smaller increase month-on-
declining commodity export prices and weak consumer
month than financial markets had anticipated. Consequently
confidence. The former is expected to weigh on mining
markets now believe that it is less likely that the Fed will raise
investment plans, while the latter is expected to impact the
official rates in September. The FOMC minutes that were
retail sector. We maintain our bearish view in the Australian
released later that day also gave financial markets ammunition
dollar (AUD) and expect further weakness towards 0.70 by the
to believe that the rate hike will come later. They resulted in
end of this year.
lower Treasury yields, lower expectations about rate hikes and a lower US dollar. As long as these expectations dominate in financial markets, the US dollar will probably remain under some pressure. However, we expect strong US economic data
Performance In % with US dollar as basis
2
going forward to turn sentiment in the US dollar in a positive direction. We expect “some” further improvement ahead as the
1
gains in the job market continue to support the economy and the Fed to hike rates in September. Therefore, we remain
0
bullish on the US dollar. -1
…while commodity price weakness weighs on commodity currencies…
-2 CHF
Lower commodity prices have not only weighed on emerging
NZD
EUR
JPY
GBP
SEK
CAD
NOK
AUD
market currencies, but also of currencies of G10 countries that are major commodity exporters. For example, the Norwegian
Source: Bloomberg
krone and the Canadian dollar fell on the back of weaker oil prices. WTI dropped to a new low this year on a sharp
ABN AMRO major currency forecasts
increase in oil inventories, while Brent oil is just hoovering above this year’s low. Norway’s economic growth turned negative (-0.1% quarter-on-quarter) in the second quarter, which was in line with expectations. …but a recovery in NZD as dairy auction price rose The New Zealand dollar (NZD) was supported as dairy auction prices recovered by 15%. However, we maintain our bearish view on the NZD as current dairy prices are still 25% and 60% lower since the beginning of 2015 and 2014 respectively. We expect the Reserve Bank of New Zealand to lower the Official Cash Rate by 25bp in September and to remain dovish on the exchange rate. Our year end NZD/USD forecast is 0.63.
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
20-Aug Q3 2015 Q4 2015 1.1129 1.00 1.00 123.92 125 128 137.92 125 128 1.5615 1.47 1.49 0.7127 0.68 0.67 0.9639 1.09 1.10 1.0728 1.09 1.10 0.7289 0.72 0.70 0.6584 0.65 0.63 1.3173 1.34 1.36 9.4687 9.50 9.50 9.2349 9.00 8.50 7.4627 7.46 7.46
Source: ABN AMRO Group Economics
Q1 2016 1.05 130 137 1.52 0.69 1.05 1.10 0.69 0.62 1.38 9.50 8.50 7.46
Q2 2016 1.05 135 142 1.50 0.70 1.07 1.12 0.67 0.60 1.41 9.50 8.25 7.46
Q3 2016 1.10 135 149 1.51 0.73 1.04 1.14 0.65 0.59 1.43 9.50 8.00 7.46
Q4 2016 1.15 135 155 1.51 0.76 1.00 1.15 0.64 0.58 1.45 9.50 8.00 7.46
2
G10 FX Weekly - USD & commodity FX lower
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