ETFSverige
Hem » Börsen, ETF:er, Featured, Headline

Poised for further weakness?

24 mars 2017 Inga kommentarer

USD Poised for further weakness? ETF SecuritiesPoised for further weakness?

ETF Securities Weekly Investment Insights USD Poised for further weakness?

Trade idea – LUSB LN & SUSB LN

Highlights

  • USD has fallen against its major currency counterparts as the US Federal Reserve (Fed) projections fell short of hawkish expectations.
  • The EUR/USD and GBP/USD are trading at the top of their respective ranges established after Trump’s election.
  • Further upside would require a significant catalyst, which could come in the form of a failed attempt to pass healthcare reform in US House of Representatives. In this scenario the GBP has potential to gain as shorts remain considerably elevated.
  • Otherwise, these pairs could retrace recent gains as the probability of rate hikes later in the year appear largely underpriced according to Federal Fund futures.

Last week, the failure of the Fed to raise its prospective interest rate trajectory put pressure on the US Dollar. The trade weighted value of the currency has fallen almost 2% in recent days tracing a 20 basis point (bp) drop in 10 year nominal US treasury yields. Despite raising the benchmark Federal funds rate by 25 bps as expected, the Federal Open Market Committee (FOMC) kept its December projections for the benchmark rate virtually intact, defying market expectations of a more aggressive tightening plan.

US Dollar weakness has coincided with positive news for the Euro and Sterling sending both pairs higher. Moderating rate hike expectations surfaced as Emmanuel Macron delivered strong performances in the first series of live presidential debates and the UK released healthy retail sales data. The confluence of factors has prompted both pairs to break through both their respective 50 and 100 day moving averages but remain at the top of recent ranges.

From a technical standpoint, the EUR/USD and GBP/USD have both reached key resistance points that have emerged following the Trump election. Traditional momentum indicators have yet to signal that either pair is overbought but are approaching such levels. A move higher above these levels would likely trigger buying but would require a significant catalyst.

One such catalyst could emerge from the contentious vote on a healthcare reform bill that is scheduled to be held in the House of Representatives today (having been postponed from yesterday) and acts as a precursor to Trump’s ability to pass his sweeping fiscal reform program. Should Trump fail then the US Dollar could come under pressure as optimistic growth and tightening expectations are curbed. In the alternative case where the bill is passed, then prospects for the US Dollar would be more positive. The market is currently pricing in a probability of a June rate hike at 54%, which could rise in coming months and allow the currency to retrace recent losses.

In terms of speculative positioning, shorts against the US Dollar are 70% below their five year average while longs have been trimmed to more reasonable levels. Meanwhile, Euro longs are at record highs and GBP shorts at record lows. In this respect, any further weakness in the US Dollar could be best expressed through GBP. Poised for further weakness?

Important Information

This communication has been provided by ETF Securities (UK) Limited (”ETFS UK”) which is authorised and regulated by the United Kingdom Financial Conduct Authority (the ”FCA”).

This communication is only targeted at qualified or professional investors.

The information contained in this communication is for your general information only and is neither an offer for sale nor a solicitation of an offer to buy securities. This communication should not be used as the basis for any investment decision. Historical performance is not an indication of future performance and any investments may go down in value.

This document is not, and under no circumstances is to be construed as, an advertisement or any other step in furtherance of a public offering of shares or securities in the United States or any province or territory thereof. Neither this document nor any copy hereof should be taken, transmitted or distributed (directly or indirectly) into the United States.

This communication may contain independent market commentary prepared by ETFS UK based on publicly available information. Although ETFS UK endeavours to ensure the accuracy of the content in this communication, ETFS UK does not warrant or guarantee its accuracy or correctness. Any third party data providers used to source the information in this communication make no warranties or representation of any kind relating to such data. Where ETFS UK has expressed its own opinions related to product or market activity, these views may change. Neither ETFS UK, nor any affiliate, nor any of their respective officers, directors, partners, or employees accepts any liability whatsoever for any direct or consequential loss arising from any use of this publication or its contents.

ETFS UK is required by the FCA to clarify that it is not acting for you in any way in relation to the investment or investment activity to which this communication relates. In particular, ETFS UK will not provide any investment services to you and or advise you on the merits of, or make any recommendation to you in relation to, the terms of any transaction.  No representative of ETFS UK is authorised to behave in any way which would lead you to believe otherwise. ETFS UK is not, therefore, responsible for providing you with the protections afforded to its clients and you should seek

Kommentarer är avstängda.