📈 69% of S&P 500 stocks beating the index - a historic record! Pick the best ones with AI.See top stocks

JPMorgn adjusts its dollar forecasts, particularly through USD/JPY

Published 15/08/2024, 15:42
© Reuters.
USD/JPY
-
VIX
-

Investing.com - The foreign exchange markets have seen a great deal of volatility over the last few weeks, and this has resulted in JPMorgan (NYSE:JPM) adjusting its dollar forecasts.

The months of July and August will go down as one of the more memorable macro & political volatility episodes in recent history, analysts at JPMorgan said, in a note, dated Aug. 14.

“Over the course of six weeks, investors witnessed the replacement of a U.S. presidential nominee, an assassination attempt, a +10% JPY TWI [trade-weighted index] rally, a pivot to jumbo Fed cuts in September, and the single-largest intraday spike in VIX since 1990, among others events,” the bank said.

The foreign exchange response has been pronounced though the dust has yet to fully settle, the bank added, but the broad contours point to low-yield short-covering, high-yielding / pro-cyclical underperformance, and a volatile but net-weaker U.S. dollar.

The main FX casualty in the volatility spike was FX carry, which will be hard-pressed to recover the dominant status it enjoyed throughout the last 12-18 months.

Year-to-date carry returns have since been erased, and the bank’s various proxies for the broader carry trade positioning point to 65%-75% of those positions having now been unwound.

The dollar’s response to all this falls somewhere between as-expected and slightly disappointing, the bank added, with the 100-basis-point rally in the U.S. short-end simply too large for the dollar to ignore.

JPMorgan has lowered its USD forecasts, particularly through the USD/JPY pair. It now sees its USD/JPY forecast across the horizon to 2024/4Q at 146 and 2025/2Q at 144, from 147.

“We still see reasons to be optimistic on USD’s overall prospects: 1) the U.S. labor market is weakening but other data since have been ok; 2) RoW cyclical data isn’t sufficiently strong to drive USD lower; 3) the USD historically tends to consolidate after such large rate swings; 4) USD-positive risks from the US election still linger; and 5) August seasonality tends to be supportive for USD,” JPMorgan added. 

 

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.