Today we publish a slightly longer version of FXR with our general thoughts and outlook for G10, EM and Asian currencies 2013. We also include separate sections on the specific drivers for selected currencies in addition to our favored trades for the coming 12 months. Looking back at the FX performance YTD, it is rather obvious the FX market has rewarded our long favored theme of flight to quality and strong fundamentals with NZD, NOK and SEK being the top G10 performers. G4 continues to have obvious domestic home-grown underlying problems which prevent a meaningful rebound in-line with long-term attractive valuations. The outlook for JPY is the worst as the japanese currency, in addtion to poor fundamentals, is considered the most overvalued G10 currency. Hence we expect JPY weakness in 2013 as the market cautiously may start to consider rewarding higher yielding currencies in a low volatility environment. 2013 will be a year of continued large economic and political challenges. However, our central projections also indicates improved global growth (PPP-adjusted 3.8% 2013) and central banks that continue to support the global recovery. Moreover we expect Spain to enter the ESM/OMT-programs which at least temporary should stabilse the euro outlook before political risks weigh on the common currency later during the year. EUR/USD will also turn lower H2 2013 on improving US growth prospects. Risks are elevated in the near-term: a solution to Fiscal cliff is a requirement for our scenario of rising risk appeite H1 2013.
Click here to read the full report: FX Ringside
SEB tech team