The NAB FX Strategy team has outlined their predictions and top trades for 2015.
Like most financial prognosticators they reckon the US dollar will be a world beater in 2015 and say they “remain unabashed USD bulls, encouraged by the prospect of Fed policy normalisation at some point in 2015, while other major central banks continue to pump liquidity into markets at near-zero rates.”
But in a nod to all the other forecasts out lately, most of which are US dollar bullish, they note that “since bullish dollar views are very much consensus thinking, careful consideration should be given to scenarios under which the consensus view once more proves wrong”.
In the end though they put their chips with the divergent policies of the Fed, ECB and BoJ believing that balance sheet action amongst these three big central banks will be the dominant macro FX story:
The rationale for continued dollar strength in 2015 is all too familiar but no less compelling as a result. Having ceased expanding its balance sheet in late 2014, the Fed should now be looking to exit ‘zero interest rate policy’ at some (as yet indeterminate) point in 2015. Whatever the date, this is expected to come well ahead of most other G10 central banks. Meanwhile, the Bank of Japan pledges to keep the pedal to the metal with its newly installed ¥80tn per year QQE programme (worth some 15% of GDP). Last, ECB President Mario Draghi’s ‘whatever it takes’ mantra will eventually override German protestations (philosophical and, potentially, legal) to deliver sufficient balance sheet expansion to ensure that we are far from done with the downside on EUR/USD.
It also means they are forecasting 80 cents in 2015 for the Aussie dollar and the “high 70s come 2016.”
Here is the full list of forex forecasts.
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