Ashley Davies Quotations

The yen's loss of upside momentum should also come as a relief to the high-yield currency bloc, with a sharp strengthening of the yen perhaps the biggest near-term risk for these currencies.

We remain long dollar/yen from 116.70 heading into the new year.

A lot of negativity over the election was already priced in heading into the weekend. Euro-dollar should head higher this week as uncertainty diminishes and the shape of the new coalition government becomes clearer.

A strong ZEW survey, combined with rising EU labor costs for the fourth quarter, due on Friday, should help support ECB rate expectations and the currency.

While the overall composition of growth was good, the headline number was perhaps not sufficiently strong to drive a sustained rally in the yen just yet.

Most important will be CPI, which is expected to grow year-on-year after stripping out both food and energy prices.

While the continued strength of the yen does present a risk to stretched carry positions in high-yield currencies, our near-term expectation is that the yen is unlikely to extend its February gains.

The New Zealand dollar is at risk of disappointment at the Reserve Bank of New Zealand meeting and the New Zealand economy is likely to slow sharply next year.