While Draghi certainly provides some dramas, rocking and rolling markets, the main driver of sentiment is oil. The black gold affects stocks, other commodities and currencies – not only commodity currencies. What does imply for the trend moving forward? The team at SocGen explains.
Here is their view, courtesy of eFXnews:
Oil prices are higher again, and so too are iron ore prices…With BHP warning of a near-term, correction (downwards) and with output of iron ore soaring, the rally should be treated with a bit of caution, but it’s going to go on supporting the Australian dollar for now.
The oil price rally by contrast has better foundations as the supply/demand imbalance is slowly being resolved and while the upside is limited, confidence that the cycle has turned is growing and that will remain a big FX driver.
We’re long AUD/NZD* and the iron ore bounce should help, and short USD/CAD, EUR/RUB and GBP/NOK, all trades which get help from rising oil prices.
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