Jane Foley, Senior FX Strategist at Rabobank, joined Tip Tv and shared her observations on EUR/USD, USD and on the rate hike scenario in UK.
EUR/USD: Resilient – but why?
Foley believes that EUR/USD has stood supported despite Greece related headlines, only due to fall in risk appetite. The stock market scenario in China, the expected Fed rate hike plan and political issues globally have kept the risk appetite levels lower. EUR should be behaving like a decent funding currency, but all these political issues not giving much to the euro carry trade.
Foley further comments that, even the emerging market currencies are up versus the EUR, which goes against the carry trade idea, and is supporting EUR/USD.
Interest rate differential argument still stands, USD will get strong ahead
Foley explains how interest rate differentials are present in the Forex space, and it doesn’t matter when the Fed starts its rate hike plan, the USD is set to gain strength ahead. She further says that the market is short EUR, but not as short as before.
Foley speaks about how the money has come back into Eurozone, similar to what seen in Yen during Tsunami days.
Bank of England: Are they going to move?
Foley answers this question with a ‘No’, she doesn’t expect the central bank to hike rates this year, but forecasts May 2016 to be the likely lift-off month, and even February if inflation data is appealing.
Foley explains how despite rising wages, the low productivity will keep the BoE on hold this year, but a split in the MPC might be seen ahead. She believes that global concerns will will limit UK’s enthusiasm for a rate hike, and what Carney did before was only warm up the markets for a hike.
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