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17 Sep 2013
Flash: EUR/USD positioned to upside - Danske Bank
FXstreet.com (Barcelona) - Danske Bank strategists note that the initial dollar sell-off as Larry Summers left the Fed chairman race was perhaps a bit overdone and the dollar index reduced a 0.6% loss to a 0.3% loss later during US trading.
Key Quotes
“However, focus is now on the FOMC meeting, which should be a market-moving event for the currency market this week.”
“Positioning appears to be overall neutral, which leaves risks fairly symmetrical – and if anything perhaps a bit to the upside on EUR/USD.”
“While the announcement of reduced QE should be dollar positive, the Fed is widely expected to do what it can to keep rate expectations in check.”
“And since short-term rate spreads are the dominant driver of FX, the dollar is at risk from coming out weaker if the Fed is successful in convincing investors that QE may be reduced, but that the first rate hike is still far away.”
Key Quotes
“However, focus is now on the FOMC meeting, which should be a market-moving event for the currency market this week.”
“Positioning appears to be overall neutral, which leaves risks fairly symmetrical – and if anything perhaps a bit to the upside on EUR/USD.”
“While the announcement of reduced QE should be dollar positive, the Fed is widely expected to do what it can to keep rate expectations in check.”
“And since short-term rate spreads are the dominant driver of FX, the dollar is at risk from coming out weaker if the Fed is successful in convincing investors that QE may be reduced, but that the first rate hike is still far away.”