Credit Agricole CIB FX Strategy Research notes that the US political risk is back to haunt USD yet again, sending it lower across the board.
In that regard, CACIB notes that the key question for the market remains ‘how much of the political headwinds are already in the price’.
“While we believe that US political risk should ultimately blow over, chances are that it will remain an important driver of FX markets in the coming days.
Next week’s data calendar is relatively light and may not provide any distraction from the uncertainty surrounding Trump’s Presidency at present. If anything, we expect data to highlight the improving cyclical outlook in Europe and Japan, which could help support JPY and EUR,” CACIB argues.
On Commodity FX, CACIB notes that with markets already expecting an extension of oil output cuts, the OPEC meeting next week may have a less significant positive impact.
Against this backdrop, CACIB prefers to avoid the USD for now and prefer relative value trades like longs in both EUR/GBP* and AUD/NZD.
EUR/GBP is trading circa 0.8609, and AUD/NZD circa 1.0751 as of writing.
Source: Credit Agricole CIB Research
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