EUR is broadly in line
The IMF is out with some interesting headlines. They say:
- The US dollar real effective exchange rate is overvalued by 10 to 20% compared to US medium-term fundamentals
- Euro is broadly in line with euro zone fundamentals as a whole, ranging from undervaluation of 5% to overvaluation of 3%
- Germany, EURO real effective exchange rate is overvalued by 10 to 20% compared to German fundamentals
- China's Yuan is broadly in line with fundamentals but current account surplus still too large
- Japan's Yen is broadly in line with fundamentals due to appreciation in 2016
- British pound valuation is 0-15% above level consistent with fundamentals, uncertainty over Brexit it high
According to this, the
- EURUSD should continue its run higher
- EURGBP should head higher
- GBPUSD is neutral
- The USDJPY should head lower.
