Forex Flash: Twist to QE4 – Nomura
Forex pairs in this Article »
EUR/GBP
FXstreet.com (Barcelona) - Nomura Strategists Jens Nordvig and Saeed Amen note that this week, the FOMC chose to replace Operation Twist with QE4 and also introduced numerical thresholds, replacing the calendar approach.
They see that Equities were broadly higher afterwards, with US Treasury yields also higher on the week. Looking to this weekends Japanese election, they feel that with additional political risk events scheduled next year, Yen weakness could well be sustained into 2013.
They note that their Asian Strategy team recently published the results of a survey of over 100 of Asia's institutional investors in Hong Kong and Singapore, with a third of Singapore investors and a half of Hong Kong based investors expecting the US to go over the fiscal cliff.
They are also bearish on US growth prospects in stark comparison with the consensus of US economists. There is also an expectation from Asian investors that the BoJ will be one of the most aggressive in implementing QE, and consequentially they expect more JPY weakness. Elsewhere, they expect EUR to weaken and 10 year yields to rise before the end of 2013.
Alternatively, they are broadly positive on Asian FX appreciation, albeit with some differentiation between currencies, such as under performance in INR. They feels that in Q4 2013, Chinese GDP growth is more likely to be below 7% than above 8%, but the majority of answers fall in between the two figures. Nordvig and Amen remain predominantly long Asia.
In G10, they note that they sold EURGBP and had been waiting for an opportunity to sell since the release of October data indicating a continuation in foreign purchases of gilts. Given the passing of various event risks (UK Autumn Statement and Mario Monti), they judged that it was the right time to enter short.
They see that Equities were broadly higher afterwards, with US Treasury yields also higher on the week. Looking to this weekends Japanese election, they feel that with additional political risk events scheduled next year, Yen weakness could well be sustained into 2013.
They note that their Asian Strategy team recently published the results of a survey of over 100 of Asia's institutional investors in Hong Kong and Singapore, with a third of Singapore investors and a half of Hong Kong based investors expecting the US to go over the fiscal cliff.
They are also bearish on US growth prospects in stark comparison with the consensus of US economists. There is also an expectation from Asian investors that the BoJ will be one of the most aggressive in implementing QE, and consequentially they expect more JPY weakness. Elsewhere, they expect EUR to weaken and 10 year yields to rise before the end of 2013.
Alternatively, they are broadly positive on Asian FX appreciation, albeit with some differentiation between currencies, such as under performance in INR. They feels that in Q4 2013, Chinese GDP growth is more likely to be below 7% than above 8%, but the majority of answers fall in between the two figures. Nordvig and Amen remain predominantly long Asia.
In G10, they note that they sold EURGBP and had been waiting for an opportunity to sell since the release of October data indicating a continuation in foreign purchases of gilts. Given the passing of various event risks (UK Autumn Statement and Mario Monti), they judged that it was the right time to enter short.
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