Wells Fargo - "U.S. Dollar Index (USD): We are mixed on the dollar, expecting gains against the major currencies but weakness against commodity and emerging currencies. Despite the Q4 slowdown, U.S. growth should remain stronger than the other major regions. The U.S. currency should thus gain against the major currencies, especially with technicals and positioning broadly neutral. Commodity and emerging currencies should outperform however, as stronger growth and favorable markets support continued capital flows to those markets.
Euro (EUR): We expect the euro to weaken over the medium-term. The central bank’s outlook is leaning dovish once again, while pace of improvement in the peripheral Eurozone bond markets has slowed. A soft Eurozone economy should see the euro weaken over time, while FX positioning offers plenty of scope for the euro to decline.
Japanese Yen (JPY): The yen should be steady in the near-term but weaken gradually over the medium-term. A subdued economy and aggressive action to reflate the economy should see the Japanese currency soften over time. Near-term yen moves could be restrained however given sizeable existing short positions, extended technicals, and some increased sensitivity of the G7 countries to excessive currency weakness."