Central bank view gives Informa top spot

Informa Global Markets won last week's 12-month currency forecasts with close calls on EUR/JPY, GBP/USD and USD/JPY after correctly gauging central bank action and the political and economic climates in the UK and the US.

CLICK HERE FOR THE PDF

On October 17, 2014, EUR/JPY was trading at 137 when Informa projected the pair to fall to 136 in a year's time. Last week, the pair was trading around 135.

"We were content to be relatively bullish on EUR/JPY also on bigger yen weights even though [Informa] could at no time be considered euro bulls," says Tony Nyman, FX fundamentals manager at Informa. "In fact, like many other firms, we were beginning to factor in likely European Central Bank quantitative easing for Q1 2015."

The firm had a more bearish view on sterling, which was trading at 1.61 a year ago and has since declined to 1.52. Informa's call on GBP/USD was 1.50. Regarding USD/JPY, in October 2014 Informa had projected the pair to go up from 107 to 118 in a year's time, just shy of last week's rate of 120.

"On some of the crosses – euro, much of the commodity bloc – we have been relative bulls in the interim," Nyman says. "However, like much of the broader market, we expected throughout that the Fed would begin to raise interest rates ahead of the Bank of England (BoE), and though a Fed delay now looks inevitable, Yellen and company are still rightly tipped to move first."

Looking ahead, Informa remains largely bullish on the dollar, while suspecting a period of relative range-trading to occur on most other pairs. Over the next three to 12 months, the firm predicts the EUR/USD to be trading lower between 1.11 and 1.08, while USD/JPY will stay range-bound centre around 120. As for GBP/USD, Nyman is calling it at 1.52 to 1.53.

He expects the Fed to have an interest rate lift-off before its peers, with December looking like a "remote possibility", but the first half of 2016 more likely and the BoE to follow in the second half of the year, if at all.

"The broader market is in wait-and-see mode as the world waits on eventual Fed tightening, possible additional easing from the Bank of Japan and European Central Bank and the next direction of commodities prices," he says. "There are also major concerns over China's economic outlook, which is hitting risk sentiment and leading to cautious trade. Hence, our fairly steady forecasts right now."