EUR/USD, GBP/USD, USD/JPY: The "trumpflation" trade continues to develop, where are these pairs going in 2017 (Nomura)

Nomura expects the dollar to continue its rally in 2017:

"The FOMC has delivered a surprise this week by signaling three rate hikes in 2017 compared with two in September. The dollar subsequently strengthened and we believe that it is on the USD/JPY pair that the rally has the most potential.

As the BoJ has committed to maintaining borrowing rates close to 0%, the rate hike with the US is likely to support the USD/JPY. Risk sentiment remains an important parameter for the pair, but it remains positive for the moment. We don't expect any surprise by the BoJ next week. The markets will probably not react.

We expect the USD to rise in 2017, but unlike 2016, it is likely that fiscal stimulus will be the main driver and not monetary policy. The global growth momentum which is stronger than last year should also reduce the likelihood of experiencing risk aversion episodes that caused the USD/JPY to fall earlier this year.

The "trumpflation" trade is still developing. The USD is breaking through important levels at an impressive speed.

This should continue if Donald Trump is to pass new legislation faster than anticipated. Policy will continue to dominate the attention of investors next year and we expect parity on the EUR/USD while the GBP should be heading for new lows." says Nomura.