Credit Agricole CIB FX Strategy Research notes that into of one of the most important weeks for the FX markets this year, investors are seemingly playing it safe, having cut some of their longs in the EUR.
In that regard, CACIB expects the ECB to indicate next week that a QE-taper is coming but it may defer the announcement of any details until later in the year
"Any deliberate vagueness of the ECB's message or a more aggressive jawboning of the currency by the President, could keep EUR under pressure in the near-term. The primary beneficiary of that will be USD," CACIB argues.
In addition, CACIB also notes that the RBA, and the BoC will also hold their policy meetings next week.
"We expect the RBA to remain on hold and stick to its neutral bias on rates while re-iterating its mild protest against a stronger currency.
We expect no change in the BoC rates next week but there is a non-negligible risk that the bank may signal a rate hike in October, validating the current market expectations.
In all, the two central bank meetings (RBA, BoC) may have no lasting impact on the FX markets with AUD and CAD driven by the outlook for US rates and global commodity prices," CACIB adds.
Source: Credit Agricole CIB ResearchOriginal Article
