Group Economics
G10 FX Weekly
Macro & Financial Markets Research Roy Teo ,+65 6597 8616
Come-back of the US dollar
Georgette Boele, +31 20 6297789
24 September 2015 • • •
Come-back of the US dollar… … and Draghi downplayed the likelihood of immediate action Downgrade of AUD, NZD and NOK forecasts
Come-back of the US dollar
domestic growth. Looking ahead, we expect the RBNZ to lower
Since the FOMC meeting, some members have clearly
the OCR by 25bp to 2.5% in December, keeping monetary
expressed that last week’s outcome was a close call and that a
policy low for the rest of 2016. Our 2015 and 2016 year end
lift-off this year remains likely. This has given a boost to the US
NZD/USD forecasts are now 0.60 (from 0.63) and 0.55 (from
dollar across the board. Meanwhile, in a speech before
0.58), respectively.
European parliament, ECB president Mario Draghi reiterated his dovish stance that the QE programme can be altered in
Norges bank surprise triggers new EUR/NOK forecast
size, composition and duration. However, Mr Draghi also
Norges bank surprised financial markets by cutting rates to
downplayed the likelihood of immediate action. In short Mr
0.75% and left the door open for another reduction. Our energy
Draghi dampened market prospects for more QE and this has
analyst expects oil prices to recover in the coming months. Our
given some support to the euro. Despite these remarks, we still
year-end target for Brent oil prices is USD60 per barrel. It is
stick to our base case scenario that the ECB will step up its
likely that this recovery in oil prices will only work through the
monthly QE purchases by EUR 20bn before year end. In
economy next year. Still in the short-term, a weak economic
addition, we expect the Fed to start hiking in December. As a
backdrop will likely prompt the Norges Bank to cut rates one
result, EUR/USD will likely to fall to parity.
more time. Therefore, we now expect one more rate cut by the Norges Bank this year to support the economy. The krone has
Downgrade of AUD forecast: RBA to cut OCR in November
a tendency to move in tandem with oil prices. In time a
We have downgraded our outlook for the Australian dollar.
recovery in oil prices could therefore support the krone and
Weak business investment spending and slower China
dampen the effect of another rate cut on the krone. We have
economic growth (6.5% in 2016) will remain headwinds for the
adjusted our year-end forecast in EUR/NOK to reflect the
Australian economy and the AUD. We now expect the
above-mentioned dynamics and see a bit more krone-
AUD/USD to decline further towards 0.68 (from 0.70) and 0.60
weakness than we had expected. Our new year-end forecasts
(0.64) by the end of 2015 and 2016 respectively. We still see a
for EUR/NOK for 2015 and 2016 are 9.50 (9.00) and 8.50
case for the Reserve Bank of Australia (RBA) to further ease
(8.00), respectively.
monetary policy later this year in November, which is not fully priced in by financial markets. In addition, we now think that the RBA is likely to keep monetary policy loose for the rest of
ABN AMRO major currency forecasts Changes are in red/bold
2016, compared to our previous expectations of 50bp rate hike in the second half of 2016. RBNZ easing bias and weaker NZD outlook Similarly, we have also lowered our forecast for the New Zealand dollar (NZD). Though the Reserve Bank of New Zealand (RBNZ) is likely to keep the Official Cash Rate (OCR) unchanged at 2.75% in October (due to recovery in dairy auction prices), we expect them to maintain their dovish bias.
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
24-Sep Q4 2015 1.1188 1.00 120.09 128 134.35 128 1.5270 1.49 0.7327 0.67 0.9777 1.10 1.0938 1.10 0.6966 0.68 0.6294 0.60 1.3327 1.36 9.4111 9.50 9.4648 9.50 7.4607 7.46
As the full effects of weak dairy prices have yet to filter through to household disposable income, we expect consumer spending to weaken further. Last but not least, business confidence has deteriorated to the lowest level since early 2009. This is expected to weigh on business investments and
Source: ABN AMRO Group Economics
Q1 2016 1.00 130 130 1.49 0.67 1.10 1.10 0.66 0.58 1.38 9.50 9.25 7.46
Q2 2016 1.05 135 142 1.52 0.69 1.07 1.12 0.64 0.56 1.41 9.50 9.00 7.46
Q3 2016 1.05 135 142 1.50 0.70 1.09 1.14 0.62 0.55 1.43 9.50 8.75 7.46
Q4 2016 1.10 135 149 1.49 0.74 1.05 1.15 0.60 0.55 1.45 9.50 8.50 7.46
2
G10 FX Weekly - Come-back of the US dollar
Find out more about Group Economics at:https://insights.abnamro.nl/en/ This document has been prepared by ABN AMRO. It is solely intended to provide financial and general information on economics.The information in this document is strictly proprietary and is being supplied to you solely for your information. It may not (in whole or in part) be reproduced, distributed or passed to a third party or used for any other purposes than stated above. This document is informative in nature and does not constitute an offer of securities to the public, nor a solicitation to make such an offer. No reliance may be placed for any purposes whatsoever on the information, opinions, forecasts and assumptions contained in the document or on its completeness, accuracy or fairness. No representation or warranty, express or implied, is given by or on behalf of ABN AMRO, or any of its directors, officers, agents, affiliates, group companies, or employees as to the accuracy or completeness of the information contained in this document and no liability is accepted for any loss, arising, directly or indirectly, from any use of such information. The views and opinions expressed herein may be subject to change at any given time and ABN AMRO is under no obligation to update the information contained in this document after the date thereof. Before investing in any product of ABN AMRO Bank N.V., you should obtain information on various financial and other risks and any possible restrictions that you and your investments activities may encounter under applicable laws and regulations. If, after reading this document, you consider investing in a product, you are advised to discuss such an investment with your relationship manager or personal advisor and check whether the relevant product 窶田onsidering the risks involved- is appropriate within your investment activities. The value of your investments may fluctuate. Past performance is no guarantee for future returns. ABN AMRO reserves the right to make amendments to this material. ﾂｩ Copyright 2015 ABN AMRO Bank N.V. and affiliated companies ("ABN AMRO").