9 Apr 2015
Two key reasons yen will fall much further than euro - Capital Economics
FXStreet (Bali) - There are two key reasons to think that the yen is likely to fall a lot further than the euro this year, notes Andrew Kenningham, Economist at Capital Economics.
Key Quotes
"First, we expect monetary policy to be loosened more, and earlier, than widely anticipated in Japan whereas we think it is highly unlikely that the ECB will spring any surprises."
The second reason to expect the euro to perform better than the yen this year is that the markets are likely to focus on the early benefits of QE in the euro-zone but its apparent failure after two years in Japan. In the eurozone, QE – along with negative policy rates – has contributed to weakening the exchange rate, lowering bond yields and lifting equities, all of which have boosted confidence in the economic outlook. Although growth remains weak, it seems likely to be a little higher than many expected only a few months ago.
Key Quotes
"First, we expect monetary policy to be loosened more, and earlier, than widely anticipated in Japan whereas we think it is highly unlikely that the ECB will spring any surprises."
The second reason to expect the euro to perform better than the yen this year is that the markets are likely to focus on the early benefits of QE in the euro-zone but its apparent failure after two years in Japan. In the eurozone, QE – along with negative policy rates – has contributed to weakening the exchange rate, lowering bond yields and lifting equities, all of which have boosted confidence in the economic outlook. Although growth remains weak, it seems likely to be a little higher than many expected only a few months ago.