More news on the USD move today over on Reuters.
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USD Bulls Are Running!
The crowed USD long positions are getting a good squeeze today.
FED'sDudley making the following comment: Continued financial tightening would weigh on FOMC. In other words we see what's happening in markets and we won't hike again until we're fairly sure there's nothing happening in the global economy that will hurt the US. Not surprising comments really due to his dovish stance.
Here is an article recently posted on Bloomberg some of you may find a good read.
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Yeah I agree. I think Cameron made it part of his electoral pledge to offer a referendum so he basically now has to, to save huge embarrassment. On the other hand the timing is important if there is a high influx of refugees, or another terrorist attack maybe would tilt the balance in the other direction?Originally posted by Potter View Post
We know for certain that volatility is coming for the GBP. The GBP relies heavily on the flow of money into the UK made by investment. Investors crave a stable political environment, and any uncertainty over the UK's future EU membership will have a negative reaction.
In essence there would maybe a binary section in the GBP. A vote to stay in the EU could be GBP positive. A vote to leave could be GBP negative.
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EUR To End The Year Below Parity But Don't Sell It Outright.
Bank of America Merrill Lynch:
Themes: ECB trying to get ahead of the curve again: Following the market disappointment from the December meeting and even lower inflation data, the ECB almost pre-committed in the January meeting for more policy easing, most likely in March. This is consistent with our view that the ECB will be forced to do more this year and, if anything, it is happening even sooner than we had expected. However, the market does not seem impressed. A 10bp deposit rate cut was already priced in for this year. Following the December disappointment, investors seem skeptical whether the ECB could really overwhelm with decisive further action. The Euro, as a funding currency, is finding support in the risk-off market environment so far this year. And the market has also priced less Fed hikes after weak manufacturing data in the US.
Positioning in the vol space may have also kept EUR/USD within a range after the ECB. We remain bearish EUR, but expect the path to remain choppy. If anything, the price action so far this year validates our strategy of selling EUR rallies, rather than being short EUR. More ECB easing and Fed rate hikes should eventually drive the Euro down, but a gradual ECB approach and a cautious Fed in response to mixed data suggest that EUR/USD may not weaken substantially yet and that the path will not be smooth.
Forecasts: EUR to end the year below parity: We continue to expect EUR/USD to end the year at 0.95. This projection is consistent with our adjusted equilibrium estimate based on the large difference between the output gaps of the Eurozone and the US. Our projection also assumes more ECB easing and three Fed hikes this year. We have only marked to market our Q1 projection, to 1.05 from parity, taking into account the price action so far this year.
Risks: mostly to the upside Despite expecting more ECB easing, the risks to our EUR projections are tilted to the upside. If the global market sell-off intensifies, or US data outside the labor market does not improve, the Fed may stay on hold for most of the year. The strong USD seems to be affecting US manufacturing data, which could force a Fed reaction. Moreover, investors are currently focusing on the risk sell-off and the collapse in commodity prices, which puts the theme of diverging monetary policies on hold for now.Leave a comment:
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Forex, Markets, Macro Economic News Discussion.
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