Comments by BofAML's co-head of Asia FX and rates strategy, Adarsh Sinha
- Market isn't pricing in enough US rate hikes
- This may change after Fed meeting this week or next month at the latest
- 2019 pricing is for two hikes even though Fed is saying three
- 2020 pricing in zero hikes even though Fed is saying at least once
- There's a risk Fed may sound more hawkish today
- Inflation language may be upgraded after core PCE moved up
Sinha also argues that EUR/USD may decline to 1.1500 because the US tax reform will have "a big impact" in consumer spending and capital expenditure growth, while at the same time the Fed is delivering rate hikes.
He also says that AUD/USD is to fall below 0.7500 in the short-term due to falling commodity prices. Meanwhile, he says that recent yen weakness is also down to portfolio outflows with Japanese investors starting to buy Treasuries unhedged.
The reasoning for the yen is something mentioned earlier last month here, where Japanese investors were shying away from Treasuries due to a surge in the Libor.
