The poor jobs report in the US left the dollar vulnerable and other currencies celebrating against the greenback. What’s next?
Here is their view, courtesy of eFXnews:
The BLS has shot the albatross: The market reaction to the jobs data is to abandon HMS RateHike, stuck in the Doldrums, and head for the life-rafts. Those friendly economic winds which supported the dollar and the notion of a summer rate hike have vanished and left the foreign exchange becalmed.
The dollar rallied by 15% on a trade weighted between July 2011 and January (since when it’s down4%. Over 5 years, It’s sup against every other major currency, and the three biggest losers (the Brazilian real, Russian rouble and South African rand) have all halved their value over 5 years.. Of the G10, second best is the pound, down 10%, while the Norwegian Krone has lost almost a third of tis value and this year’s star, the yen, has lost over 25%. But over the last year, things have mostly been quiet. Sure, the yen has rallied a lot, up by nearly 17% y/y, as it recovers ground lost in the Abe era.
But EUR/USD is within 1% of where it was a year ago, a year during which it has averaged 1.11, and meandered pretty aimlessly between 1.05 and 1.17.
I don’t think USD/JPY will move as much in the next year as it did so far ion 2016, and I doubt that EUR/USD will get outside the range of the last year in the next one, either.
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