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Danske - In the immediate aftermath of the....>

FOREX
FOREX: Danske - In the immediate aftermath of the FOMC meeting last week, we
argued that the near-term outlook of low vols/attractive USD carry-to-risk
favoured USD longs going into August as long as we did not get (1) significant
short-term deterioration in US data, (2) a complete breakdown in US-China trade
talks and/or (3) a hefty equity sell-off. From that perspective, Trump's
surprise reescalation of the trade war on Thursday has raised the risk of (2),
which indeed has driven a setback in the USD with EUR/USD back at 1.11. However,
the potential for (3) remains limited by markets pricing in Fed easing on the
higher risk of (2), which limits the near-term EUR/USD upside potential in our
view, as carry-to-risk still heavily favours the USD. In today's session we will
get more clarity on (1) but we expect the US service sector to remain healthy,
which on a lack of other news could drive a slightly stronger greenback in
today's session.

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