HSBC comments centre on the USD, their outlook for the Federal Open Market Committee (FOMC), and how thats going to play out for major FX.
In summary, analysts at the bank remain bearish on European FX, citing the central bank outlook, the geopolitical outlook, and domestic economy issues
- “As the gap between market pricing and central bank guidance remains wide, we expect USD strength to continue over the near term, notably against the EUR and GBP”
- “Geopolitical risks will also carry scope to add further momentum to recent market moves” (strengthening US dollar)
- EUR and GBP also face domestic economic challenges, for which a ‘high for longer’ rate outlook seems unlikely to offer sustained support for these currencies.
HSBC also see similar for AUD, saying AUD overvaluation has built, and built, since November last year:
- AUD will likely fall further as markets trim back expectations of Fed rate cuts
- HSBC cite fair value for AUD/USD ina wide, 0.6290 – 0.6667 range
The USD is King