“The ECB’s ‘downside risks’ have all been forgotten, as a string of headlines have tugged the USD lower,” note TD Securities analysts.
Key quotes
“In the past few days, GBP has made a convincing break of the critical 1.30 level, underpinned by the overnight headlines that the DUP would support May’s plan. This probably shielded the EUR from another weak IFO. For the EUR, the question is how much shock value is left from bad news?”
“Positive Brexit stories should help support broader Europe, especially if it helps to revive sentiment. We note that despite the ECB, the EUR should be trading north of 1.14. The lingering government shutdown doesn’t help the USD, reflecting in part the loss of growth momentum. Talks of ending the balance sheet runoff bolster the weaker USD theme and perhaps ease concerns of tighter USD liquidity.”
“We still like the periphery G10 story and note that AUD, NOK, and CAD all screen cheap on our FX growth factor – we like an equally-weighted basket versus the USD. That suggests AUDUSD dips should be supported around 0.71 and USDCAD could soon make another test below 1.33.”
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