Analysts at Societe Generale have furnished clients with their latest foreign exchange forecasts for the G10.
Studies from the bank suggest the British Pound still has some notable downside to deliver while the Euro is seen fall back to the 1.05 support zone against the US Dollar.
Indeed, the key theme of Soc Gen’s latest forecasts are a stronger US Dollar over coming months.
This will pressure both the Euro and Pound Sterling lower.
Societe Generale’s view remains that the dollar uptrend is likely to re-establish itself before year-end as the market prices in a higher probability of Fed rate hikes next year, though they do not expect a Fed hike until 2Q 2017.
But the trend is also likely to be a weak one given the cautious Fed.
Elsewhere, analysts note:
- One of the major market themes as September approaches is pondering a possible Donald Trump Presidency. Trump promises easier fiscal policy, which would help the dollar, but can he deliver on the promise (if he’s elected)? What he may be able to deliver is an even tougher environment for world trade growth, and the biggest losers in that regard are in Asia.
- Trump isn’t good for the Australian or New Zealand dollars, for China or for the Asian Tiger economies. What he implies for EUR/USD, by contrast, isn’t at all obvious.
- Brexit fallout keeps us bearish of the pound, especially after the short-covering rally of recent
days. Europe lacks news or policy changes.
- Pressure on the BoJ to counter yen strength can only grow, but the bigger Asian story is the continued success of Chinese FX policy.