TD Research notes that USD has been stuck between a tug-of-war of low volatility, which is encouraging carry trades, and the prospects for the Fed to shake this regime up a bit over the summer.
"We believe the market ignored the hawkish bits of minutes, instead focusing on the ’prudence’ of awaiting additional evidence to hike rates again. We think this is a low bar to clear and note that the read from the high-frequency data shows the economy growing above trend," TD argues.
"The takeaway is that while growth has lost momentum in recent months, it continues to track above potential. This, along with the steep discount in the USD and the upcoming US data releases, leaves us tactically favoring USD upside in G10," TD adds.
Source: TD Securities ResearchOriginal Article
