FX Monthly: Quo vadis, dollar? by Lombard Odier Bank

February 15, 2019

The dollar rebound in February has admittedly caught us by surprise. We attribute this USD strength to a confluence of factors, including a technical correction and angst about a global slowdown (ex-US) that has proven to be deeper than we expected. We notably think hunt for yield (the carry trade) has helped the dollar against G10 FX, which also explains why higher-yielding EM FX has held up well in the past couple of weeks. This has prompted us to revise a number of our forecasts while maintaining a bearish stance on the greenback.

we have lowered our EURUSD forecast trajectory and now see the pair ending the year at 1.20
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More specifically, we have lowered our EURUSD forecast trajectory and now see the pair ending the year at 1.20 (1.24 previously). This change is based on a euro-area slowdown that has been sharper and more protracted than we anticipated. It suggests that low-yielding currencies such as the euro will struggle in the near term. However, the external headwinds to the region are likely to abate if the US and China reach a compromise (our central scenario). The subsequent economic recovery should allow the euro to appreciate against the USD which, in our view, remains vulnerable to a rise in US risk premia due to the ballooning twin deficit.

On CHF, we maintain our forecasts unchanged, expecting a very gradual EURCHF appreciation later this year as the SNB retains and potentially intensifies its dovish stance. On sterling, economic data and monetary policy expectations seem irrelevant for now as all that matters is Brexit negotiations. Although we still hold the view of a soft Brexit – which would propel GBP higher – we would point out that the market so far has been fairly complacent as regards the tail risk of a no-deal Brexit.

On sterling, economic data and monetary policy expectations seem irrelevant for now as all that matters is Brexit negotiations
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We have turned slightly cautious on our bullish call for the yen, at least in the near term, as positive developments on the trade front would support risk appetite and penalise safe havens. Eventually, however, USDJPY will end up being a dollar play. This, together with still-wide yen undervaluation, suggests that USDJPY will move south throughout 2019.

In China, we strongly believe that financial stability and thus currency stability continue to reign supreme for the country’s leadership
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In China, we strongly believe that financial stability and thus currency stability continue to reign supreme for the country’s leadership. We remain constructive on the yuan in anticipation of a trade cease-fire between the US and China.

Turning to Nordic currencies, we have revised higher our EURNOK and EURSEK forecasts, but still expect NOK (mostly) and SEK gains this year as we feel monetary policy expectations are currently under-priced. In the commodity FX bloc, our preference remains for the CAD and (less so) for the AUD.



also in PDF @ https://www.lombardodier.com/files/live ... _media.pdf

Source:
https://www.lombardodier.com/contents/c ... ollar.html

navid110 wrote: Thu Feb 21, 2019 8:49 am
we have lowered our EURUSD forecast trajectory and now see the pair ending the year at 1.20

thx nav man so a soft brexit they say........ can i ask what is the soft brexit?? or hard brexit i dun get it :shock:

moey_dw wrote: Thu Feb 21, 2019 3:40 pm

thx nav man so a soft brexit they say........ can i ask what is the soft brexit?? or hard brexit i dun get it :shock:

What Is The Economic Impact Of Hard Brexit vs. Soft Brexit?
https://www.fxcm.com/uk/insights/econom ... ft-brexit/

Time will tell what they will pick but either way I doubt it will be a smooth ride.

mlawson71 wrote: Fri Feb 22, 2019 12:34 am Time will tell what they will pick but either way I doubt it will be a smooth ride.

I doubt too

My question is whether we'll see such a massive crash like we did after the referendum results came out.

France's Societe Generale to cut 1,500 jobs: report



French banking group Societe Generale is planning to cut 1,500 positions in its BFI corporate and investment banking arm, Le Figaro newspaper reported on Saturday.

Citing internal bank documents, the paper said the bank was looking at two scenarios, both of which envisage 1,500 job cuts worldwide, with around 700 of them in France.

French CGT union representative Philippe Fournil could not confirm the information, but said the bank's management had on Thursday indicated it was reviewing activities within its BFI arm.

The review is part of a plan to reduce costs by 500 million euros ($567 million), the bank said earlier this month on announcing its financial results.

The bank had no comment when asked about possible job cuts on Friday, but Fournil said its management had pledged to get back to the union within "4 to 8 weeks" with more details.

Societe Generale reported higher-than-expected profits in 2018 but said it would adjust its targets and those of its investment bank for next year anticipating financial headwinds ahead.

Source: https://www.france24.com/en/20190223-fr ... obs-report

p.s: Although they reported higher-than-expected profits in 2018 they cut 1500 jobs. they feel worry for 2019 (a lesson for Risk Management)

Deutsche Bank and Commerzbank go public on merger talks

Deutsche Bank and Commerzbank confirmed on Sunday they were in talks about a merger, prompting labor union concerns about possible job losses and questions from analysts about the merits of a combination.

Germany's two largest banks issued short statements following separate meetings of their management boards, a person with knowledge of the matter said, indicating a quickening of pace in the merger process, although both also warned that a deal was far from certain.

"In light of arising opportunities, the management board of Deutsche Bank has decided to review strategic options," Deutsche said in its statement.

Christian Sewing, Deutsche Bank's chief executive, told employees that Deutsche still aimed "to remain a global bank with a strong capital markets business... with a global network."

Full story :
https://www.cnbc.com/2019/03/17/deutsch ... talks.html

I am surprised anyone wants to have anything to do with Deutsche Bank after its many recent scandals.

The Finmish police reported that in 2018 alone Finnish investors were defrauded by telephone scammers for over 5 million USD.

The police warns that this might be just the tip of the iceberg as many people have simply not reported the crime.

Most scammers were calling from UK numbers with “exceptional investment opportunities”, promising fast and easy returns with an initial investment of about 200 USD – 300 USD.

And in order to gain the victim’s trust, con artists were actually sending some money back, claiming this to be a profit.

Later scammers would ask for a much larger amount and when the money were sent all communication would break down.