Credit Agricole on potential moves in USD and GBP
The greenback's short-term outlook will be driven by global risk sentiment rather than monetary policy expectations. This is especially true as the USD was in demand for most of the last few weeks on the back of rising safe haven demand. This is at least suggested by FX positioning data. Should our base case of the UK staying part of the EU prove correct, further improving risk sentiment may initially come to the detriment of the greenback. From a broader angle, however, such a development will support the Fed in focusing more on domestic conditions. As stressed above we anticipate improving US growth prospects to make a case of the Fed hiking twice this year.
In Japan, BoJ Governor Kuroda said that results of monetary policy do not always turn out as expected and that the deflationary mind-set is deeply rooted in Japan. As such he did not provide any insights into his stance on monetary policy. If anything we believe that the central bank remains on track with easing further later this year. In the meantime, however, it will be about risk sentiment to drive the JPY. This is especially true as the JPY was among the safe haven currencies of choice during the last few weeks and months.
We remain of the view that a Brexit can be avoided and that should ultimately make a case of the GBP breaking through this year's range more sustainably.
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