Looking beyond China, we think that more easing by the BoJ, front-loading of stimulus by the ECB (plus the CBs of the G10 commodity exporters) and delayed policy tightening by the Fed and the BoE should all help prop up domestic demand in their respective economies.
Their relative outlooks should continue to diverge, however. Indeed, different from China, private debt levels have come off considerably in recent years in both the US and the UK and resilient domestic demand should remain a boon for their economies.
That still makes USD and GBP our top picks in G10 FX. At the same time, the outlook for Japan and the Eurozone as well as Australia and New Zealand should continue to suffer from their trade exposure to China (amounting to 7%, 4%, 9% and 6% of their respective GDP at the end of 2014).
We suspect that these differences will manifest themselves before long and we would be looking to buy USD and GBP especially against JPY and EUR before long.
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