The following are Credit Suisse's (NYSE:CS) latest outlooks and forecasts for the USD, EUR, JPY, GBP, AUD and NZD.
USD: Bullish. As the labor market continues its gains and the economy strengthens, we expect many EM currencies to gradually come under pressure, as excesses of the unprecedented period of record low US interest rates begin to reveal themselves.
EUR: Bearish. After cutting rates again, EUR/USD prospects will be determined by the evolution of short-term real interest rate differentials and flow-based factors, where we see scope further diminishing. We recommend selling selective EUR-EM crosses.
JPY: Bearish. Ongoing weakness in the economy and talks of further BoJ easing contrast against hike-expectations in the US. Deterioration in Japan's current account deficit, combined with our outlook for US yields keep rising, will also support a USD/JPY higher trend. GPIF-related flows will also be important – we expect a broader shift to Japanese outflows to keep yen under the pressure.
GBP: Bullish. Data remain strong and market expectations for the BoE to hike continue to be bought forward. Expectations for divergence between euro zone and UK rates are at historical highs. However, high positioning is a risk to this view, particularly as the Scottish referendum approaches. While housing concerns remain, we do not expect any macro-prudential measures from the FPC to have a significant negative impact on GBP.
AUD: Bearish. A less dovish Fed, falling commodity prices, and the potential for macro-prudential measures should keep AUD under pressure.
NZD: Bearish. Dairy prices have remained weak while RBNZ has increased their intervention. Higher NZD volatility will also likely discourage carry inflows, making it more challenging to fund New Zealand current account deficit.
