Trump victory targets - Nomura

Bilal Hafeez, analyst at Nomura offered his forecasts on the Trump victory.

Key Quotes:

"Targets: Next three months - USD/JPY 110, EUR/USD 1.05 Jun 2017: USD/CAD 1.40 Rationale: DXY is already rebounding from the Trump-lows on election night. 

The market is interpreting Trump to mean higher US inflation, and therefore a higher pace of Fed tightening beyond December. This should be dollar supportive. Long USD positions against low yielders and low inflation currencies (JPY, EUR) are attractive, with the domestic backdrop remaining FX negative. 

Political risk could also attract greater focus in Europe. We also expect CAD weakness to result from Mr Trump’s protectionist trade policies, though this may take time. Return horizon: Greater clarity around Mr Trump’s policies towards year-end should help crystallise our view. 

An ECB QE extension and the BOJ’s yield targeting could continue to weaken EUR and JPY into year-end. CAD weakness should take longer, as the market awaits details of Mr Trump’s trade agreement plans."