FX Positioning Is Attractive Into Year-End
eFXnews | Sep 25, 2015 02:49AM ET
In the post-FOMC environment, BNP Paribas (PARIS:BNPP) FX Positioning Analysis highlights some significant potential in FX markets in the final three months to year-end.
"Positioning appears completely inverse to our expectations and thus presents considerable potential for market adjustment if our economic and market scenario pans out. Typically, FX positioning tends to build during Q4," BNPP argues.
BNPP latest Positioning Analysis classifies current FX positioning into 3 clear groups:
Long: EUR, JPY, CHF and SEK.
Neutral: USD and GBPusd.
Short: NZD, CAD, AUD and NOK.
"We believe that sharp policy divergence in December will prompt a significant move lower in EUR/USD as such expectations become fully priced by the market. Specifically, we forecast that the FOMC will hike rates in December while the ECB eases policy further (by extending monthly asset purchases under its QE programme). Neither is fully priced by markets. Such simultaneous policy divergence is unusual and will likely push EUR/USD lower towards our 1.06 year-end target," BNPP projects.
"GBP is another currency that could perform strongly given the dislocation between our view and the current market expectations for the Bank of England (BoE). We believe that the BOE will start hiking in February and will hike six times (at 25 bps clips) during 2016/17. In contrast, markets price August as the start of the hiking cycle and only four hikes during 2016/17. With positioning close to zero (the market was short until recently) GBP has the potential to rally substantially as markets adjust," BNPP adds.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.