Bank of America Merrill FX Strategy Research outlines its tactical view on the USD, EUR, and GBP in the near-term.
In terms of the macro outlook, BofAML notes that the Fed is taking advantage of the good times to keep normalizing monetary policy, while the ECB is considering its way out from unconventional policies, but the exit likely will be very slow and could take the whole of 2018.
How to position in G10 FX. BofAML recommends the following strategy:
"Long USD: positioning is neutral, if not short, and US tax reform and a hawkish Fed could surprise.
Buy a EUR dip ahead of French elections: we do expect headline risks from the French elections, but we would buy a dip, particularly against CHF and JPY.
Sell a GBP rally: we expect the slow start of the Brexit negotiations to weigh on sterling, also affecting the data and keeping the BoE on hold," BofAML advises.
EUR/USD is trading circa 1.0615, GBP/USD is trading circa 1.2394 , and USD/JPY is trading circa 110.70 as of writing.
Source: Bank of America Merrill Lynch Rates and Currencies ResearchOriginal Article
