USD: Strength To Prove Temporary So Play It Tactically; What's The Trade? – Danske

Danske Bank FX Strategy Research argues that the risk of aggressive Fed near term suggests USD strength will be temporary.

On the face of it, the Fed package of hikes and QT looks rather hawkish: Fed confirms its eagerness to move on with both rate hikes and balance-sheet reduction (aka quantitative tightening (QT)). This should keep the USD supported near term.

However, the drop in actual US core inflation in May combined with a downgraded inflation outlook from the FOMC makes us doubt that the Fed will in the end be able to move on with the somewhat aggressive tightening scheme that it otherwise hints at. Thus, USD strength driven by Fed should prove temporary in our view.

In sum, we see a clear risk of the Fed moving too much, too fast on hikes and/or QT near term and thus being forced to pause later on and possibly at a time where the ECB is ready to take the next step away from further easing towards year-end,” Danske argues.

In line with this view, Danske maintains a bullish EUR/USD view in the medium term but staying tactically short* the pair targeting a dip to 1.0850 over the summer. 

Source: Danske Bank Research

The article is published by one of the foremost sources of Forex trading information. Link to the original article above.

from eFXNews http://feedproxy.google.com/~r/Efxnews/~3/brDGU0BW6FI/usd-strength-prove-temporary-so-play-it-tactically-whats-trade-danske

from Online Forex Trading Resource
View thesource article here

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s