Forex Forecast

UK Outlook Downgraded US dollar bulls remain on the front foot, still underpinned by the post-FOMC rise in UST yields. A number of other factors have entered the equation as well. Our cautious view on Cable has been reinforced by the downward revision in the UK’s sovereign ratings outlook to negative from stable by Fitch, […]

Risk Continues Advance With the glaring exception of the AUD, risk appetite generally held firm overnight with equity markets in particular maintaining their good run of form of late. Buoyed by Fed comments overnight and a rally in US shares, European bourses made gains across the board while a strong BTP auction strengthened the mood […]

USD Still Climbing The US yield curve was prodded into life by last night’s FOMC policy statement. US 2y yields climbed above 35 bp overnight and the 10y has finally hit 2.15%. This kept the yen in particular on the defensive, and the dollar also advanced more generally. USDJPY set an 11-month high trading between […]

USDJPY Bid Post-FOMC USDJPY remains well supported in the wake of the Fed and BoJ meetings, both of which delivered ‘no change’ verdicts. To be sure, there were no major surprises in either decision, but the respective policy nuances suggest a gradual Fed-BoJ divergence that should keep USDJPY risks skewed towards the upside – and […]

USDJPY Bid Pre-FOMC There was further evidence of the changing trends of the dollar overnight. After a somewhat uneventful BoJ meeting, USDJPY pushed higher, supported by higher front-end treasury yields. EURUSD also pushed lower, reversing the gains it had made in Asia.

BoJ JGB Buying Unchanged The Bank of Japan kept market participants waiting much longer than usual for their overnight policy decision. The delay prompted speculation that a further round of easing might be in the pipeline, but USDJPY dropped 30 pips when no material shift in stance emerged.

BoJ vs Fed The consolidative tone remained intact overnight in the absence of any fresh drivers, with USDJPY holding above 82 and EURUSD still sitting below 1.32. All eyes will now be on the policy decisions from the BoJ and then the Fed later today.

ISDA Declares Credit Event ISDA formally declared a credit event in Greece on Friday. There was no immediate currency reaction even though the news came an hour before FX markets closed. Earlier though, another strong US payrolls report triggered substantial broad-based gains for the dollar, especially against the euro, the yen and the Swiss franc.

ISDA Judgement Due Markets were calm overnight as news of a ‘successful’ PSI allowed was adequately absorbed. The key-short term event is the ISDA meeting at 8:00 ET which will determine whether a credit event has taken place with regard to the Greek deal.

Greek Deal Is Done EURUSD surrendered some of its overnight gains on the confirmation of an 85.8% participation rate in the Greek PSI deal. This effectively rules out the worst-case scenario – a disorderly default.

ECB On Hold The deadline for bondholders to declare whether they wish to participate in the Greek bond restructuring passed at 2000GMT on Thursday. No formal announcement has yet been made on the size of the take-up. However Reuters, citing an unnamed senior Greek official, said participation levels had reached 95%.