Credit Agricole CIB FX Strategy Research notes that the USD remains generally in a two-speed mode, gaining ground against the JPY but weakening against commodity based currencies and the EUR.
This pattern, according to CACIB, is reminiscent of 2006 when the Fed was in a mature phase of its tightening cycle, the USD tended to underperform the higher-yielding bloc but outperform the JPY which was the funding currency of choice.
CACIB also notes that such a pattern suggests that contrary to the USD-centric ‘Trump trade’ which dominated the markets around the turn of the year, the current focus is more on the idiosyncratic themes relating to the ECB, Brexit and commodity currencies.
"We see little scope for that to change for the moment as the US data calendar does not offer a decisive catalyst," CACIB argues.
Source: Credit Agricole CIB ResearchOriginal Article
