Credit Suisse have updated clients with their foreign exchange forecasts for the next three, six and twelve months.
In their latest Global FX Outlook, the Foreign Exchange Strategy team at Credit Suisse say they have turned less bullish on the US Dollar.
They meanwhile remain neutral on the Euro and have actually upped some near-term Pound Sterling projections.
As such, they revise their 3m EUR/USD higher from 1.10 to 1.15.
They nudge their EUR/CHF forecast higher from 1.07 to 1.09 in 3m and from 1.05 to 1.07 in 12m.
Their GBP/USD forecasts are raised from 1.28 to 1.34 in 3m while the 6m forecast remains at 1.22.
Furthermore, strategists turn less USD bullish on several commodity and EM currencies in 3m and 12m, most notably CAD, AUD and NZD.
Why the Weaker US Dollar Profile?
Markets believe the USD rallies as Fed resumes rate hikes while other G10 holds rates or eases further.
However, Credit Suisse believe only modest gains are likely vs EUR, GBP, AUD and CAD as this view is widely owned and the Fed is sensitive to USD strength.
“We expect JPY to outperform the USD (a view held since Feb 2016) and believe “Trumpxit” risk is also underpriced. CAD and MXN vulnerable while USD could weaken vs defensive G10 currencies (even GBP),” say Credit Suisse.
The bank is also out-of-consensus with their call for a May 2017 interest rate rise at the US Fed, currently markets price a 63% chance of a rate rise taking place in December 2016.
This alone should keep USD subdued over the near-term if correct.
See below for a summary of Credit Suisse’s calls: