Analysts at TD Securities explain that the Fed was a non-event but the threat of tariffs is back on the radar screen, with Trump believing he is winning the trade war, this game of tit-for-tat should play out until the midterms, if not longer.
Key Quotes
“This backdrop comes with signs of stress in global liquidity, with the market focused on the move in JGBs. In turn, we remain cautious on the $ bloc but think most of the weight will fall on AUD.”
“For the trade wars theme, we like AUDJPY put spreads as a proxy hedge. Alongside that, the shift in BoC pricing towards October suggests that AUDCAD has more room to grind lower. It’s held the 0.9555 lows for the year and a break of that level opens up a move towards the May 2016 lows of 0.9326.”
“EURUSD continues to hold the late-June range, suggesting buying into dips towards 1.16.”
“On the convergence trade we see more juice in the JPY, than the EUR, suggesting some room for a tactical push lower in EURJPY.”
“The BoE was mostly as expected and price action has reversed a bit. The GBP move reflects positioning more than anything else. Still, GBP trades at a discount, Brexit negotiations are fluid and a top in the DXY would fortify a buy on dips mentality in GBPUSD.”
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