BNP Paribas Research discusses a selection of its top strategic FX trade ideas for next year. Such ideas are thematically consistent with BNPP’s year-ahead outlook for G10 currencies.
“Long EURUSD: Less policy divergence between the Fed and the ECB, slowing outflows from the eurozone and valuations suggest EURUSD has significant scope to appreciate in 2019. Target: 1.25 (end-19 forecast).
Short USDJPY: A topping out of US yields, a reduction in Japanese investors’ willingness to take on foreign-currency risk and potential weakness in US equities market suggest USDJPY could fall markedly in 2019. Target: 100 (end-19 forecast).
Long EURCHF: Higher eurozone yields as the market prices in ECB tightening, against a backdrop of negative sentiment towards the eurozone already priced into markets, are likely to drive up EURCHF in 2019. Target: 1.20 (end-19 forecast).
Short EURSEK: An end to the Riksbank’s balance sheet expansion could strengthen the SEK from very weak levels. Target: 9.60 (end-2019 forecast),” BNPP advises.