ABN AMRO FX Strategy Research notes that the USD has been negatively impacted so far this on two main front: 1- Investors scaling back expectations about Trump’s fiscal policy. 2- US economic data have come in below the expectations.
In that regard, ABN expects in the coming months 1- an improvement in US economic data, 2- further rate hikes by the Fed, and 3-a rise in US Treasury yields and somewhat higher US real yields.
This, according to ABN, should result in a recovery of the US dollar towards 1.05 in EUR/USD and 1.25 in GBP/USD.
Strategy-wise, ABN argues that investors will likely take this USD rally as an opportunity to off-load their early-established long USD positions which would limit the potential upside of this USD rally.
EUR/USD is trading circa 1.0974 and GBP/USD is trading circa 1.2911 as of writing.
Source: ABN AMRO Research
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