BNP: USD vulnerable short-term as long position builds

From the FXWW Chatroom: Ahead Tuesday, we expect rising fuel prices to push US headline CPI up to a 1.5% y/y pace, while core inflation is expected to remain stable at 2.3%. Our estimates are in line with consensus. Speaking late Monday, Fed Vice Chair Fischer declined to send a strong message on the timing of the next rate hike. Market pricing for the probability of a Q4 rate hike is topping out at around 2/3rds chance of a hike which seems appropriate for now. At the same time, our BNP Paribas Position Analysis framework suggests long USD positioning has jumped in recent weeks and is now the longest position we have seen since before the USD faltered in January 2016 (see Chart). We remain bullish on the USD in the medium term and remain positioned for gains via a USDJPY/EURUSD dual digital recommendation. However, in the near-term we see downside risks and scope for the USD to retreat. In Europe, the ECB bank-lending survey should show easier credit standards for corporates but it is unlikely to alter our view that financing conditions are becoming less supportive.

View the latest market information in the FXWW Chatroom with a free trial

Leave a Reply

Your email address will not be published.