Peter A Rosenstreich
Swissquote Bank Ltd
Volatility continued to decline as political concerns fade into the background. VIX is now at levels seen before the James Comey memo rocked equity markets. Despite the nervousness in markets we anticipate investors will become numb to the scandal plaguing President Trump's administration as investigations tend to be protracted events.
In the absence of Trump-fuelled political risks, carry trade has again become attractive. USDJPY remain the barometer for investors should President Trump’s problems escalate. USDJPY’s move off 110.24 indicates easing of political uncertainties. Sentiment around the greenback has weakened and it will take a significant upside surprise in economic data to give yields the necessary push higher to boost USD.
Dovish commentary from the Feds Evans and Brainard (both voters) has lowered expectation for the FOMC minutes being released tomorrow. Both speakers highlighted the lack of strong price pressures and a historical pattern of inflation to undershoot the 2% target. Yet strong data leading up to the June rate decision could quickly shift USD bias.
Today’s US PMI and new homes sales could provide further clarity on US economic uncertainties. In addition, Fed Kashkari (voter) will speak. We see the current balanced environment positive for EM FX - specifically MXN, INR and IDR.
This report has been prepared by Swissquote Bank Ltd and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Swissquote Bank Ltd personnel at any given time. Swissquote Bank Ltd is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.
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