FXStreet (Córdoba) – Analysts from The Bank of Tokyo-Mitsubishi UFJ, expected the US dollar to remain strong during 2016, but less than the previous two years.
Key Quotes:
“More strength for the dollar, but less than in 2014 & 2015 The dollar has advanced by 9.6% on a year-to-date DXY basis in 2015 after a gain of 12.8% in 2014. We see prospects for further dollar strength next year and we are forecasting lower EUR/USD levels throughout next year.”
“However, we do anticipate much less general dollar strength than over the last two years. Crucial to the view that the dollar will advance further over the first half of the year and possibly into Q3 is that the FOMC will raise the federal funds rate at least three more times, at each press conference meeting through to September.”
“We expect the US economic data to justify this action, which while from a historic basis is extremely cautious, is more aggressive than current market expectations and pricing. If the markets’ expectations shift to pricing in a rate hike at each press conference meeting in 2016, then the 2- year yield can probably advance to close to the 1.50% level by mid-year. The current 2-year US-German yield spread is at about 130bps and the prospect of a further 40bp increase in the 2-year US yield should result in the 2-year spread widening to around the 170-180bp level, which will keep the EUR/USD rate on a downward path.”
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