The US dollar is gaining ground not only against risk currencies but also against the euro and the pound. Is it destined for more? The team at BNP Paribas weighs in:
Here is their view, courtesy of eFXnews:
BNP Paribas is watching for opportunities to enter new long USD spot trades.
“Risk-off sentiment continues this morning with Chinese stocks lower and major Asian bourses including Japan’s Nikkei 225 Index continuing to slide. While the disappointing US manufacturing ISM report appears to have contributed to markets getting off to a rough start to the year FX markets are observing a typical risk-off pattern, with high yield and commodity-bloc currencies selling off and the funding currencies outperforming,” BNPP notes
“However, the USD has also held up better than might be expected vs. the funders, with USDJPY recovering from early lows below 119 and EURUSD actually ending lower on the day. USD resilience is consistent with relative stability in US front-end yields, with the 2- year yield stabilising above 1%.
With rate markets already pricing minimal Fed tightening in 2016, there is limited scope for markets to pare back Fed expectations in response to the latest market volatility,” BNPP adds.
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