Buy USD, sell EUR later?

24 December,, London – BNP Paribas and Credit Agricole have shared their views for the US Dollar and the Euro approaching the year 2016. The following is the answer should currency investors buy USD, sell EUR later.

The US Dollar

BNP Paribas continues to see positive interest to use recent levels in the USD as an opportunity to build long exposure as we approach the new year.

“US rates markets continue to price a relatively high likelihood that the Fed leaves rates unchanged in Q1, with the implied yield on the April 2016 Fed funds contract just 13bp above the current effective rate,” BNP Paribas added in it’s analysis to buy USD, sell EUR later.

The pricing of the US Dollar is similar to the one which prevailed in the January contract heading into the fourth quarter of this year. The adjustment to fully price December Fed interest rate hike over the course of Q4 helped the USD appreciate broadly, even taking into an account the retracement of the past few days.

The Euro

Looking ahead, Credit Agricole remains of the view that global risk outlook will turn more unstable in the forthcoming weeks.

This could be mainly due to strongly capped market liquidity expectations.

“Considering the Fed’s more hawkish stance and falling expectations of the ECB and BoJ considering additional stimulus measures this is unlikely to change unless global growth expectations improve more considerably,” Credit Agricole added in its view to buy USD, sell EUR later.

Under the outlined conditions it cannot be ruled out that the EUR will face further bullish correction risk in the days to come.

However, “we remain of the view that (EUR) rallies should be sold,” Credit Agricole argued.

Even if the majority of the ECB members indicated that no more monetary policy action is required, the stance might change anew should medium term economic inflation expectations fall once more.

Consider reading: GBPUSD fundamentally range bound

Think we missed something? Let us know in the comments section below

Share Your Opinion, Write a Comment