A rudderless FX space - ANZ

Analysts at ANZ explained that the currency markets are appearing increasingly rudderless.

Key Quotes:

"While structural vulnerabilities remain in play, a better cyclical outlook, and a shorter than expected shadow from Brexit mean that the near-term outlook is somewhat brighter. However, this does not provide an automatic path to fresh 2016 highs.

China’s cycle is slowing and policy biases in Asian and antipodean countries will weigh against the flow. For these currencies to sustainably break higher, we need to see a fundamental shift in the global growth dynamic. Recent rhetoric around an increasing role for fiscal policy may provide this shift, but for now it is too early to commit.

A weaker GBP remains the clearest trend in markets. Policy easing, political uncertainty, and a twin deficit will all keep the pressure on. For the EUR, ties to the UK, together with economic underperformance, will keep downward pressure on track, though the depreciation will be far more gentle than the GBP.

AUD and NZD will remain caught between a rock (increasingly expensive currencies) and a hard place (continued flows from offshore investors). The range should be maintained. In Asia, the RMB will continue to weaken modestly, while the rest of Asia begins to weaken after excessive flow had pushed currencies away from fundamentals."