U.S. Urges Japan on Monetary Policy as Yen Volatility Raises Market Concerns 
Indonesia Surprises Markets with Interest Rate Cut Amid Currency Pressure 
Moldova Criticizes Russia Amid Transdniestria Energy Crisis 
U.S. Stocks vs. Bonds: Are Diverging Valuations Signaling a Shift? 
BOJ Rate Decision in Focus as Yen Weakness and Inflation Shape Market Outlook 
Why Trump’s new pick for Fed chair hit gold and silver markets – for good reasons 
China's Refining Industry Faces Major Shakeup Amid Challenges 
ECB’s Cipollone Backs Digital Euro as Europe Pushes for Payment System Independence 
Moody's Upgrades Argentina's Credit Rating Amid Economic Reforms 
Bank of America Posts Strong Q4 2024 Results, Shares Rise 
Mexico's Undervalued Equity Market Offers Long-Term Investment Potential 
2025 Market Outlook: Key January Events to Watch 
Bank of Japan Signals Cautious Path Toward Further Rate Hikes Amid Yen Weakness 
Lithium Market Poised for Recovery Amid Supply Cuts and Rising Demand 
Following the ECB’s surprisingly dovish message last week, signaling no hikes in 2019, we see significantly less upside for EURUSD this year. Crucially, the ECB has now broadened the range of policy options to include not only the question of when to start hiking rates but also the probability of monetary easing.
EURUSD could probably decline further in the short term, and we see a possibility of the cross falling towards 1.10. The main reasons are the following: 1) eurozone growth is set to stay weak for most of H1’2019 and the ECB is clearly keeping an eye on this risk; 2) the US economy is likely to stabilize in H1’2019, providing pockets of support for the USD as the market reprices the Fed. We see EURUSD at 1.13 on a 3M horizon.
Further out, the US-China trade deal should drive stabilization of the Chinese economy and have a positive effect on the eurozone which together with a USD that remains overvalued on fundamentals – helps set a floor for EURUSD still. We see EURUSD at 1.17 on a 12M horizon.
Hedge USD-denominated income via risk reversals
We see potential further USD strength short term and limited risk of significant USD weakening this year, and notably, our EURUSD forecast is now running close to forwards on all horizons (vs previously above) and across tenors.
As a result, we recommend hedging USD-denominated income via risk reversals: this allows one to profit from some dollar strength near term (as per our call), yet still secures a worst-case rate without locking in the negative carry from the outset.
Hedge USD-denominated expenses via (knock-in) forwards
For shorter-term horizons (up to 3 months), we recommend hedging USD-denominated expenses via FX forwards, as we see a risk of more USD strength. For longer-term maturities (over 3 months), consider incorporating optionality, which enables one to gain from a EURUSD increase; this could be done by means of knock-in forwards, which allow one to sell EURUSD above the current spot should USD weaken over time (as per our call), while still securing a worst-case rate. Courtesy: Danske
Currency Strength Index: FxWirePro's hourly EUR spot index is flashing at 53 levels (which is bullish), while hourly USD spot index was at -84 (bearish) while articulating at (09:42 GMT).
For more details on the index, please refer below weblink: http://www.fxwirepro.com/currencyindex
