19 May 2015
EUR/USD Q2 target raised from 1.07 to 1.12 - JPMorgan
FXStreet (Bali) - The Global FX Strategy Team at JP Morgan suspects that further USD depreciation lies ahead, should the Fed confirm a delay in its tightening cycle until until 2016.
Key Quotes
"Since March we have been referring to the USD index as an early-stage bubble, because that seemed the most appropriate description based on valuation, momentum and positioning."
"Also, the bullish dollar narrative was sounding lopsided since it ignored the feedback loop from a strong USD to a weak economy, lower inflation and delayed rate hikes."
"After a 4% trade- weighted decline since mid-March, we believe about half of the air has been let out of this balloon."
"Thus, these same indicators suggest that the dollar would fall further if the US economy fails to revive meaningfully and if the Fed confirms that it will not hike rates until 2016."
"The primary justification for forecasting a higher USD by year end is the belief (hope) that the US economy will step up eventually."
"Our EUR/USD Q2 target is raised from 1.07 to 1.12 as the USD bubble deflates, but we leave the medium-term forecasts unchanged at 1.05 for Q4 2015 and 1.03 for Q1 2016."
"A resumption of the euro’s downtrend rests almost solely with a revival of the US economy and eventual Fed tightening, given Europe’s stable balance of payments profile. Of course the longer the Fed delays tightening, the closer the ECB will be to tapering its asset purchases and thus the higher the trough in the euro will likely be."
Key Quotes
"Since March we have been referring to the USD index as an early-stage bubble, because that seemed the most appropriate description based on valuation, momentum and positioning."
"Also, the bullish dollar narrative was sounding lopsided since it ignored the feedback loop from a strong USD to a weak economy, lower inflation and delayed rate hikes."
"After a 4% trade- weighted decline since mid-March, we believe about half of the air has been let out of this balloon."
"Thus, these same indicators suggest that the dollar would fall further if the US economy fails to revive meaningfully and if the Fed confirms that it will not hike rates until 2016."
"The primary justification for forecasting a higher USD by year end is the belief (hope) that the US economy will step up eventually."
"Our EUR/USD Q2 target is raised from 1.07 to 1.12 as the USD bubble deflates, but we leave the medium-term forecasts unchanged at 1.05 for Q4 2015 and 1.03 for Q1 2016."
"A resumption of the euro’s downtrend rests almost solely with a revival of the US economy and eventual Fed tightening, given Europe’s stable balance of payments profile. Of course the longer the Fed delays tightening, the closer the ECB will be to tapering its asset purchases and thus the higher the trough in the euro will likely be."