The year-ahead view from Barclays
USD/JPY weakness will be a main theme in the year ahead, according to a report from Barclays.
Analysts there say USD/JPY will track down to 106 by the end of the Q32019. Meanwhile, the euro and pound will stay relatively flat.
As part of a new set of forecasts, Barclays revised higher expectations for the US dollar in the year ahead along with four Fed hikes in 2019.
“While our US growth and interest rate forecasts remain unchanged, and strong underlying momentum lends them upside risks, we have had to moderate our forecasts for most of the rest of the world. There appears to be less autonomous growth in other economies and less spill-over from the US fiscal expansion than we expected,” the write in a note.
For the euro, they see modest weakness to 1.15 at year end followed by a period of stability. Eventually they see ECB inflation forecasts moving lower.
As for USD/JPY, they see BOJ normalization and risks towards a faster decline due to trade and geopolitical developments.
For cable, they say fears are overdone and that they are confident of an exit with a transition deal. They say that should lead to a “small bump” that will fade when the market realizes it won’t be accompanied by a BOE hike.
As for the Canadian dollar, they say there is limited room for appreciation with the market already pricing in three hikes in the year ahead.
In the shorter term, they believe the New Zealand dollar will slide to 0.6300. at year end.
“We expect the NZD to be a notable underperformer over the coming quarters, as low inflation and sub-potential GDP growth support the prospect of RBNZ rate cuts over the coming year,” they write.