Both the euro and more importantly the Aussie made some advances against the greenback. The team at BNP Paribas recommends fading it and explains:
Here is their view, courtesy of eFXnews:
The EUR’s current resilience suggests eurozone investors remain reluctant to follow the ECB’s lead and chase returns overseas, perhaps wary of their experience in the aftermath of the 2015 QE announcement, says BNP Paribas.
“We see scope for EURCHF and EURJPY to extend their recent gains, but would fade EUR strength vs. the USD, with EUR resilience only likely to increase the prospect of aggressive ECB action in March,” BNPP advises.
Turning to AUD/USD, BNPP recommends fading its ongoing bounce despite a firmer Australian CPI.
“Australian Q4 headline CPI picked up to 1.7% y/y, 0.1pp above market expectations. Underlying inflation slowed fractionally to 2.0%. Our economists note pass-through of exchange rate depreciation was evident in a rise in tradables inflation, which registered its first positive year-on-year reading in four quarters. The data is consistent with the RBA remaining on hold at their meeting next week, in line with expectations.
Our economists think that Governor Glenn Stevens’ key message will remain that subdued inflation affords scope to ease further if needed. Furthermore, we note that the RBA may also be concerned with global equity market developments and a further 7% decline in iron ore since their last meeting,” BNPP argues.
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