Bank of America Merrill Lynch FX Strategy Research notes that investors' focus shifts back to central banks after the French elections.
On the ECB, BofAML notes that the central bank did not rock the boat this week, and expects them to announce QE tapering this fall, as they do not seem willing to increase the issue limit or relax the capital key.
On the Fed, BofAML's US economists do not expect the Fed to hike in June, but it is a very close call and they still expect two more hikes, followed by the beginning of unwinding the balance sheet this year, and three hikes next year.
On the BoJ, BofAML argues that the BoJ can comfortably remain on hold, as they did this week, and let the Fed and the ECB do all the work, loosening relative monetary conditions for Japan.
"Although this view of the world suggests a mixed outlook for EUR/USD, it is very bullish for both the EUR and the USD against the JPY," BofAML concludes.
Source: Bank of America Merrill Lynch Rates and Currencies ResearchOriginal Article
