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The US Dollar remains robust but is not going anywhere fast. What’s next?

Here is their view, courtesy of eFXdata:

ANZ Research discusses the USD outlook and  adopts a contrarian bullish bias, preferring to express this view in selling EUR/USD, while awaiting more attractive levels to sell AUD/USD, and NZD/USD.  

“In the G10, the EUR is set to struggle as the ECB stretches out its normalization timetable, the AUD and NZD remain expensive (beholden to the underperformance in China and with weakening domestic stories of their own) and the GBP hovers under the Brexit cloud. In emerging Asia, there is some value about but we are reticent to forecast further currency strength until we see signs of growth stabilizing. Even our revised view of liquidity suggests that a strong revival of capital flows back to the region is unlikely,” ANZ notes.

Ultimately, we think the environment favors the USD. It has growth outperformance, a curve that is as flat as it can get without deterioration in growth driving easing expectations and a top-of-the-table rate structure.  Though rather than buying it against risk currencies like the AUD or NZD, we prefer the EUR and await more compelling levels to resell the former two,” ANZ adds.

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