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26 Aug 2014
Long greenback’s continue building - BMO Capital Markets
FXStreet (Guatemala) - Stephen Gallo, European Head of Currency Strategy at BMO Capital noted that long USD positioning is building up.
Key Quotes
“That is probably a factor behind yesterday’s lower close in the DXY and similar price action today."
"But recent shifts in US yields have been peculiar, with short-term and belly rates moving up, but longer-term tenors in decline. USD and EUR 5yr/5yr forward inflation swap rates have been moving lower together. Since the two are often good proxies for longer-term market inflation expectations, these moves point to a degree of ‘spillover’ between the two economies on the price and output sides, and this may be slowing EUR/USD weakness down a bit."
"USD/CAD traded pretty softly during the Asian session and London morning, coming within 3 or 4 pips of 1.0950/60 support. Many of the forces acting on the pair at present are conflicting with each other."
"The oil price has continued to trade without much upward momentum at all, but lower USD demand and buoyant equity prices are propping up the CAD. Key interest rate differentials are still turning up in importance for USD/CAD though, and they should be watched closely around macro economic data."
"Our economists are, on balance, looking for lower readings than the consensus in today’s July durables numbers as far as the headline and ex-transport numbers are concerned. On August consumer confidence, however, they are slightly higher. Given the USD’s softer tone so far this week, surprisingly weak prints will probably trigger some short-term long USD covering, but 1.0900/25 in USD/CAD will remain excellent support for now and probably straight into personal income and spending data on Friday."
Key Quotes
“That is probably a factor behind yesterday’s lower close in the DXY and similar price action today."
"But recent shifts in US yields have been peculiar, with short-term and belly rates moving up, but longer-term tenors in decline. USD and EUR 5yr/5yr forward inflation swap rates have been moving lower together. Since the two are often good proxies for longer-term market inflation expectations, these moves point to a degree of ‘spillover’ between the two economies on the price and output sides, and this may be slowing EUR/USD weakness down a bit."
"USD/CAD traded pretty softly during the Asian session and London morning, coming within 3 or 4 pips of 1.0950/60 support. Many of the forces acting on the pair at present are conflicting with each other."
"The oil price has continued to trade without much upward momentum at all, but lower USD demand and buoyant equity prices are propping up the CAD. Key interest rate differentials are still turning up in importance for USD/CAD though, and they should be watched closely around macro economic data."
"Our economists are, on balance, looking for lower readings than the consensus in today’s July durables numbers as far as the headline and ex-transport numbers are concerned. On August consumer confidence, however, they are slightly higher. Given the USD’s softer tone so far this week, surprisingly weak prints will probably trigger some short-term long USD covering, but 1.0900/25 in USD/CAD will remain excellent support for now and probably straight into personal income and spending data on Friday."