11 April, AtoZForex, London – For the start of a new week, Morgan Stanley has shared with us its G4 currency outlook for investors to acknowledge as the market picks up the speed from the weekend. The following is weekly Forex market outlook for USD, EUR, JPY, and GBP.
Weekly Forex market outlook
Last week markets were focused on the March FOMC minutes, which as expected sounded dovish leaving the USD to consolidate. This week, we have scheduled President Obama and Yellen meeting, along with UK and Canada rate decisions, and more.
USD: Not bullish yet – Neutral
“The dovish FOMC minutes supports our view that we need to see substantially better economic numbers for the Fed to turn hawkish,” Morgan Stanley begins.
Therefore the investment bank thinks the USD still has some downside potential in the near term. Improving Asian data suggests that China’s GDP numbers scheduled this week have limited downside risk, which should support risk environment and weaken the USD. In addition, CPI data will also be under the spotlights.
EUR: Increasing political risk – Neutral
“The short term outlook appears to be range bound for the EUR but the longer term picture is increasingly looking bearish,” Morgan Stanley pointed for its weekly Forex market outlook.
Sovereign bond spread widening, Brexit concerns and the EU-Ukraine association treaty have limited the EUR upside.
JPY: Strength prevails – Bullish
The JPY is at risk of breaking higher if the BoJ is not helped by the Fed. Japanese funds seeing foreign investment profits declining due to stronger JPY may have to increase hedging activities. Moreover, the Japanese interbank lending market has crashed under negative Japanese interest rates declining monetary velocity, all JPY positive.
GBP: G10 Underperformer – Bearish
“GBP has remained an underperformer in the G10 space, failing to hold on to its gains against the USD unlike the other risk currencies,” Morgan Stanley noted.
Brexit risk remains as investors get increasingly concerned following the Dutch rejection of the EU-Ukraine deal in the referendum. GBP prices are likely to remain in tangent with volatile oil prices ahead of the OPEC meeting on April 17th.
“We focus on CPI and BoE rates decision this week,” Morgan Stanley finished the weekly Forex market outlook.
Also see: Goldman Sachs: Dovish Fed shift, bullish USD scope
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