USD: Uptrend Still in Place. Bullish.
We think the current USD fall will run out of steam. The catalysts for a turnaround back to a USD rally will be either strong US data confirming the need for tighter monetary policy in the US this year or other central banks globally fighting back against their own currency strength. In the short term FX rates can be influenced by central bank action but longer term it’s about the growth outlook relative to the rest of the world.
EUR: Structural Weakness. Neutral.
Should the US economic data improve as we expect, US yields are likely to push higher. Meanwhile, the ECB’s ongoing large purchase program is likely to continue to weigh on European yields. Both growth and rate differentials will weigh on the EUR and long term capital exports are likely to accelerate. Add political risk …….. Read full story