We wrote about a similar call from last year’s best FX forecasting major bank — ING — yesterday.
The worry here is that the euro trade is already extremely crowded and when bank pile into a trade it’s often near the peak.
Update: They’ve also lowered the end-2017 forecast to 0.90. In three months they expect 1.14.
In six months they expect 1.11 from 1.20 previously. In one year 1.08 vs 1.15 prior.
Update 2: We are revising our EUR/GBP forecast in a similar manner, to 0.75, 0.74, 0.73 in 3, 6 and 12 months (from 0.77, 0.76 and 0.75), while keeping the end-2016 and end-2017 numbers unchanged at 0.70 and 0.65, respectively.
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We revise our AUD/$ forecast to 0.79, 0.77 and 0.75 in 3, 6, and 12 months (from 0.83, 0.82 and 0.79), with our end-2016 and end-2017 forecasts also at 0.75. We revise our $/CAD forecast to 1.19, 1.20 and 1.22 in 3, 6, and 12 months (from 1.13, 1.14 and 1.15), with our end-2016 and end-2017 forecasts at 1.24 and 1.26.
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At a very basic level, we draw two lessons from this: (i) deflation in the Euro area has a structural element, given how high periphery price levels still are; and (ii) given still high periphery price levels, the kind of growth rebound typical in emerging markets is unlikely.
