Crédit Agricole via eFXnews
The recent stellar US retail sales and NFP data should pave the way for further USD gains ahead of the June Fed meeting next week. We expect Yellen to strike a more constructive tone and encourage further frontloading of rate hike expectations. Our call remains for a Fed lift-off in September.
Next week’s Eurogroup meeting maybe the last real chance to avoid a Greek default. Recent official discussions seemed to have focussed on providing Athens with a bailout extension in exchange for the implementation of piecemeal reforms. Such an outcome, while not a comprehensive solution, could help ease the worst of the Greek default fears. This should reduce the safe haven appeal of CHF. The upcoming SNB meeting on 18 June should further underscore the bank’s policy divergence vs the Fed and support USD/CHF.
G10 smalls could struggle to perform against a background of growing Fed rate hike expectations. Going into next week’s Norges Bank meeting, it seems that many negatives are in the NOK price despite its high beta to oil. A heavy data week for the GBP could leave rate expectations unchanged, offering no support for GBP/USD.
What we’re watching:
EUR: Lower despite a potential Greek deal – a potential Greek deal next week need not be the comprehensive solution many are hoping for. In addition, a dovish ECB should be a bit of a drag on EUR across the board.
USD: FOMC in focus – the outcome of next week’s FOMC policy meeting will be the greenback’s main driver. A more constructive statement and press conference should help the currency. (for detailed US calendar for next week, see here)
GBP: Test– next week’s CPI and labour market data, as well as the BoE minutes are unlikely to push rate expectations higher from current levels. GBP/USD remains vulnerable.
CHF: The focus turns to SNB – the SNB seems less likely to turn more aggressive any time soon. CHF will likely still be driven by external factors like (abating) Greek deposit outflows.
NOK: Further easing anticipated – we expect Norges Bank to ease further next week. The currency impact should only be limited.
