28 Jul 2014
Strong USD bias in the period ahead - ANZ
FXStreet (Bali) - ANZ FX Strategists are betting for a strong USD bias in the period ahead.
Key Quotes
"We retain a strong USD bias in the period ahead. We expect volatility to show an increased tendency to behave in a step function."
"Volatility might be very low for a period, but when it rises, it rises abruptly and substantially. A portfolio that is overweight carry or momentum strategies, under-weighting valuation as a currency screen, or overweight assets in markets where liquidity can be one-sided, are likely to find this challenging."
"On this basis, we continue to expect peripheral currency weakness to be the dominant trend. We also, for the first time, expect the EUR to be part of this dynamic, if but only in the near-term. To the extent this EUR view is driven at least partly by the USD side of the equation, we remain distrustful of calls for broad EUR weakness on the crosses."
Key Quotes
"We retain a strong USD bias in the period ahead. We expect volatility to show an increased tendency to behave in a step function."
"Volatility might be very low for a period, but when it rises, it rises abruptly and substantially. A portfolio that is overweight carry or momentum strategies, under-weighting valuation as a currency screen, or overweight assets in markets where liquidity can be one-sided, are likely to find this challenging."
"On this basis, we continue to expect peripheral currency weakness to be the dominant trend. We also, for the first time, expect the EUR to be part of this dynamic, if but only in the near-term. To the extent this EUR view is driven at least partly by the USD side of the equation, we remain distrustful of calls for broad EUR weakness on the crosses."