BNP keep their forecasts for a higher euro and yen vs USD
BNP Paribas economists remain of the view that the economic backdrop will remain too uncertain to allow a rise in Fed rates in the short-term, while slower growth later this year will keep it on hold for longer.
"The combination of a weakening risk environment coupled with continued unwind of Fed tightening expectations - US 2y yields are 16.5bp lower than before the Fed - creates a backdrop against which we can see further weakness in the USD vs the G10 current account surplus currencies," BNPP argues.
"We continue to forecast EURUSD rising to 1.16 and USDJPY falling to 108 by mid-year," BNPP projects.
The weathervane is getting dizzy over at BNP HQ;
- After the Dec Fed hike they said that USD longs was still the trade.
- In Jan they were looking for a March hike and recommended longs at 118.60. Unfortunately they were blown out of that at 116.90, just before pop to 121.068
- In Feb they saw a 100% chance of a US recession (though with no timings attached)
- More recently they've gone bearish on USD
It's a similar pattern at most banks. There are still some who dream of 130 USDJPY and parity in the EURUSD. I've no problem with people changing their mind, I'd just prefer it if they do it before events not after.