For the yen to strengthen, there must be collaboration in rate hike movements between the Bank of Japan (BOJ) and other major central banks, specifically the Fed.
Even more to the point; the Fed’s rate must come down while the BOJ’s must rise.
The below are from two insightful discussions—one focusing on the Bank of Japan’s anticipated interest rate hikes and another on the Federal Reserve’s expected rate cuts alongside Europe’s economic outlook.
The two segments were recorded separately with no connection with each other but put together and they tell the tale of a potentially stronger yen and weaker dollar in 2025.
CLSA Strategist Predicts December Rate Hike by Bank of Japan with Two More in 2025
Key Takeaways:
The Bank of Japan is expected to raise rates by 25 basis points in December 2024, with two more hikes likely in 2025.
Persistent inflation, driven by a weak yen and rising import costs, pressures the BOJ to act.
Rate hikes are anticipated to benefit households, corporates, and the finance sector.
UBS Predicts Four Fed Rate Cuts and Recommends Reducing Exposure to European Markets
Key Takeaways:
UBS predicts three to four Fed rate cuts between December 2024 and Q3 2025, with inflation as a key factor.
Rising bond yields could pressure equities, though strong corporate results offer some support.
Europe faces weak growth, rising bond yields, and political uncertainty, especially in Germany.
UBS advises reducing European exposure, except for selective sectors like pharmaceuticals and luxury goods.
Recession is more imminent in Europe, while the US may face longer-term challenges.
