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Quarterly Outlook video: Queasy and uneasy

The theme for currencies in Q4 is ‘The end for the reach of yield’ John J. Hardy, Head of FX Strategy at Saxo Bank, explains.

Disenchantment with QE’s inability to lift economies during Q3 was epitomised by a European Central Bank meeting that sounded the retreat on any further easing. Meanwhile, the Bank of Japan shifted the focus to the yield curve as a further signal of stepping away from QE, Hardy says. While that disenchantment did not necessarily crystallise in Q3, this might not be the case in Q4.


Hardy believes we are going to see more unwinding of reach for yield in Q4 and QE currencies will be strong while the reach for yield currencies are weaker.


The key event risk in Q4 is the US presidential election. Hardy believes we will see a negative dollar if republican nominee Donald Trump wins or looks like winning and dollar positive if not. He also believes that the dollar will eventually come out on top regardless of the presidential vote outcome.

A Trump presidency could cause more stimulus, higher interest and policy rates and tax repatriation which would all be dollar-supportive.

Hardy claims that there is no no strong outlook for Japanese yen in Q4. Wildcard sterling may be a safer bet than euro and the scandies could get cheaper against other G10 currencies.

Meanwhile, the credit cycle is expected to start turning especially in Australia and Canada, Hardy concludes.

04:30 minutes
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