USD: Higher than pre-FOMC levels, strong comeback story – BAML
FXStreet (Delhi) – Ian Gordon, Research Analyst at BAML, note that the markets continue to digest the Fed’s “dovish hold” last week, and the knee-jerk USD weakness was understandable given the dovish elements of the statement, which exceeded even dovish expectations. But, the dollar has since reversed its losses and remains higher than pre-FOMC levels.
Key Quotes
“With the near-term rate outlook significantly less certain now, and complications due to the ongoing China induced volatility, investors may be hesitant to re-engage USD longs at the current juncture. While near-term caution is warranted, we believe three factors suggest tactical USD longs could make sense:”
“1. USD longs are significantly less stretched than they have been over the past one or two years.”
“2. Don’t miss the forest for the trees – despite the Fed’s dovish tone, US fundamentals remain strong and will likely trump short-term distractions from China. This ultimately supports rate hikes in December, as our US Economics team believes.”
“3. Markets thus far seem to under-appreciate the risk of other central banks taking action since the Fed has not, most notably in the case of the ECB.”
Ian Gordon, Research Analyst at BAML, note that the markets continue to digest the Fed’s “dovish hold” last week, and the knee-jerk USD weakness was understandable given the dovish elements of the statement, which exceeded even dovish expectations. But, the dollar has since reversed its losses and remains higher than pre-FOMC levels.
(Market News Provided by FXstreet)