BofAML: Las divisas en las próximas 51 semanas

Redacción - Jueves, 12 de Enero

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FX Viewpoint: 2017: the 51 weeks ahead
•   We remain USD bulls but see short-term risks. We closed our short EURUSD trade, but remain long USD against JPY, AUD and NZD.
•   Uncertainty supports non-USD trades. We are long EURJPY and short CHFSEK. We see GBP drop in Q1, but will buy the dip.
•   USD weakness would help EM sentiment and support undervalued currencies like PLN, where inflation is on the rise.

Constructive on the USD for 2017, but short-term risks

After the post-election USD rally, markets have already moved at about 80% of our bullish USD projections for 2017. We remain bullish on the USD for the year, but also see increasing short-term risks. Following the strong USD rally, we closed our short EURUSD trade with a profit in December, but remain long USD against JPY, AUD and NZD. USD weakness would help EM sentiment and support undervalued currencies like PLN where domestic inflation is also on the rise.

The bullish USD case

The bullish USD case finds support from: the market positioning that, although long, is not stretched yet; Trump fiscal stimulus in a US economy that is already at full employment; Fed taking advantage of the market euphoria to hike rates; and markets starting pricing a hawkish Yellen replacement when her term expires in early 2018.

The USD risks

USD risks include: speculative profit taking following the strong rally; weak seasonality of US data in Q1; uncertainty about the size and timing of the US fiscal stimulus; and aggressive Trump rhetoric against China and globalization more broadly.

Beyond the USD

Elevated US uncertainties make non-USD trades attractive to us. We have been arguing for EUR/JPY upside since September, as we believe that the BoJ has more credibility in easing monetary policy than the ECB. Assuming no tail risks in Europe, we like SEK, particularly against CHF. We stick to our contrarian year-ahead short EUR/GBP trade, although we see some further weakness in cable following Article 50 activation in Q1. And we are long vol in GBP/USD and EUR/USD.

Beyond the US

Beyond the US, Europe is facing political tail risks, with elections in France, the Netherlands, Germany and possibly Italy. We have also argued that markets are not fully appreciating the ECB constraints and the challenges ahead. Geopolitical risks depending on the policies of the new US administration could be another blind spot, with hard to predict market implications. Historically high equity prices and still low volatility could suggest market complacency.

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