Analyse fra BNP Paribas:
USD geared for further gains The USD is set to strengthen further this week with the upcoming February retail sales report, which is expected to be upbeat. US yields are on a renewed upward trajectory, which will continue to catalyse the USD. With the strength in Friday’s employment report a significant signal for future wage pressures, the Fed will soon be in a position to start tightening once it sees a turnaround in core inflation. Our economists believe the most likely starting point for tightening is September, but markets are now likely to re-consider the possibility of a June move. US 2y yield moved back above 72bp (close to December highs).
And, the structure of the US curve still significantly under-prices the pace of tightening implied by the median FOMC ‘dot’ forecast. This suggests scope for the USD’s relative yield advantage to improve further in the run-up to the March FOMC meeting if data remains robust. We remain long USD vs the EUR and JPY via spot and vs the CHF via options. EUR to slip with decline in real yields As the European finance ministers meet, attention may once again start to turn to Greece’s bailout package, and concerns around liquidity in Greece. In the light of the continuing talks to help Greece move forward, its situation does not constitute significant event risk.
Of more significance is the now precipitously declining real relative yield for the EUR vis-à-vis the USD (chart). The EUR is unlikely to fare particularly well and is within touching distance of our target of 1.08. The data continue to surprise to the upside (save for this morning’s weaker Germany trade balance) but the surprises have done little to help EURUSD. We are also short EURCAD (via spot) and EURSEK (via options).
