The US Dollar seemed to have reached a peak after the inflation report disappointed. What ´s next? The team at BNP Paribas sees the end of the short squeeze.
Here is their view, courtesy of eFXdata:
BNP Paribas Research discusses the USD outlook and thinks that the recent squeeze in USD shorts which boosted the currency in April has now run its course.
“We think despite US front-end rates having risen significantly this year, rate differentials will not be sufficient to protect the USD from underlying structural flows from investors looking to reduce USD exposure heading into a period of reduced policy divergence.
A likely necessary condition for a meaningful rebound in EURUSD will be an improvement in eurozone Q2 data (which our economists expect). The US data calendar is light next week, limited to the release of April retail sales on 15 May,” BNPP argues.
In line with this view, BNPP maintains a short USD/JPY* position targeting a move to 105.
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