The financial markets are currently in turmoil. What is the outlook after the crisis ends?
Here is their view, courtesy of eFXdata:
Bank of America Global Research discusses its preferred strategy when the current market’s end come to end.
“The world economy is likely to be in a growth recession this year, with annual GDP growth the lowest since 2009. Moreover, in the long-term, the experience with the virus (complex supply chains) is yet another reason to expect a trend towards de-globalisation, on top of the negative effects of the trade tensions and “tech war”, BofA notes.
“Post-panic trade = long carry, short USD...As long as a major credit event is avoided, we are bullish on carry plays over a 1-2 month horizon. Fed rates will be 100bp lower than pre-virus according to our forecast, while markets even price zero rates by end-year. When the dust settles, the demand for “safe yield“ across asset classes will likely be higher than ever before. And with USD rates much lower, investors will have to look mostly outside the US for such yield plays,”BofA adds.
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