Mark McCormick, North American Head of FX Strategy at TD Securities, explains that a busy week looks to end on a whimper, with the price action exhausted from headline ping-pong.
“On the week, the European reflation theme gained some traction while the market looks to price out some of GBP's Brexit premium.”
“Keep in mind that the majors are still holding ranges, though the spillover of macro stress to the US keeps us cautious on the USD against the other reserve currencies. The spike in the MOVE is likely to keep the VIX elevated.”
“Italy, however, will keep the EUR in check until month-end but a possible ebbing of the US-China rhetoric could offer a lifeline to the likes of AUD, where we just went long against CAD.”
“We are also short USDJPY, which could benefit from a rise in the VIX or a rotation of capital back to Japan. We continue to expect the underperformance of CAD, holding long exposure in EURCAD through riskies and core shorts against the scandis.”
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