Halister News

(Bloomberg) -- Janus favors USD long positions against EUR as Fed is likely to increase rates twice this year while euro will probably weaken regardless of the outcome of U.K.’s EU membership referendum, portfolio manager Ryan Myerberg says in interview.

• May consider adding to existing USD longs depending on U.S. data, language of Fed speakers and U.K.’s EU vote
• For Fed to hike, U.S. economic data should show continued signs of improvement
• Fed speakers likely to confirm message of FOMC minutes and keep the June meeting a ’’live’’ one as Fed aims to keep investors thinking it can act already next month
  • Puts more chances for a rate hike at July meeting as Brexit risk is likely to be off the table by then
• Plans to keep EUR underweight positions against USD heading into the referendum as common currency is likely to weaken in both scenarios
• If U.K. votes to stay, which is the base case scenario at Janus, euro is likely to drop in a risk on environment

POLITICAL RISK

• Conversely, a vote to leave will cast doubts on Europe’s outlook, paving the way for euro’s weakness as political risk may rise across EU
• Keeps bearish stance on EUR and favors selling any EUR/USD rally toward 1.16
• Prefers to stay neutral on sterling as volatility likely to stay high heading into the vote
• Sees sterling spiking to ~1.50 vs USD if U.K. votes to stay; may drop toward ~1.30 in event of Brexit
• BOE is unlikely to increase rates before first half of next year as it will want to assess impact of uncertainty linked to U.K. referendum on the economy
• Also favors long USD position vs EM currencies and, among them, TRY, BRL, RUB, PLN, INR; exposure to EM limited
• NOTE: Myerberg manages portfolios in Janus fundamental fixed-income group, which had $35.8b of assets under management as of March 31
• NOTE: BlackRock also long USD, said market pricing of first Fed hike too dovish