Lacklustre take-up in the ECB’s TLTRO fuelled QE expectations. Neither the EUR nor the bond market seems content with the ECB measures launched so far. In short, lack of a “QE premium” in the EUR means we may see further downside.
EUR/USD: QE premium to be priced in
EUR/USD does not appear to be pricing in a larger QE announcement, and hence we may see further downside in the cross if we are right that the market will increasingly bet in this direction.
JPY: Too fast, but not too far
The sudden JPY weakening was “too much of a good thing” for Japan as it seems the policymakers are beginning to curb further JPY weakness.
GBP: First mover advantage
The Scottish referendum risks are now behind us, and while the story is not over, focus now turns to the Bank of England.
EM FX: Generally weaker
EM FX continues to suffer and more Fed-related general weakening is ahead.
SEK: Near-term “risk premium”
Riksbank easing, government crisis and regulation are three arguments for a near-term risk premium in the SEK.
NOK: Room for further downside
We continue to see arguments for a lower EUR/NOK cross.
DKK: Stronger DKK and sub-zero deposit rates
Intervention and unilateral CD rate cut if the DKK strengthens further.
Read the full report: FX Strategy