What’s the state of play
Kit Juckes from SocGen talks about the FX market’s focus on growth dynamics at the moment and how that will mitigate any rate cut from the Fed this week.
At the same time, he worries that we will probably hear more about USD intervention in the weeks ahead, especially if/when the dollar strengthens.
“How then to position? We like EUR/JPY shorts at times of uncertainty and will stick with those. Decent US data and a dovish Fed ‘ought;’ to help those of us inclined to bottom-fish for cheaper AUD and CAD, even if neither of those positions has done us any favours in the last week. USD/CAD shorts look more secure than AUD/USD longs, but since July’s best currency so far is the Turkish Lira, despite a large CBRT rate cut, maybe yield-seekers are going for ‘proper’ yields and bypassing G10 currencies that yield less than the US anyway.”