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USD: SocGen and ING Questioning if Dollar Weakness Can Extend

USD
USBulletMarketsForeign Exchange BulletsNorth America
  • There has been a substantial pullback for the USD index since Monday, highlighted by EURUSD rising back above 1.0400 and USDJPY extending below 153.00 overnight, on the back of stronger-than-expected Japanese wage data. Amid the renewed greenback pessimism, both Société Générale and ING appear cautious on how much further this short-term trend can extend.
  • SocGen questions if USDJPY can fall much further "if the US economy remains robust, the Fed doesn’t ease much further and Treasury yields remain, essentially, rangebound". They, instead, see a "short-term solution [of] selling EURJPY [...] where the deterioration in Eurozone growth expectations relative to Japan is striking". SG have been arguing in recent weeks that relative growth expectations matter more than relative rates.
  • ING meanwhile think markets are "under-pricing the risk of a more prolonged trade spat" between the US and China as AUDUSD has "erased its short-term risk premium", concluding "the new layer of uncertainty generated by this tariff scare argues against a sustained dollar decline".
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  • There has been a substantial pullback for the USD index since Monday, highlighted by EURUSD rising back above 1.0400 and USDJPY extending below 153.00 overnight, on the back of stronger-than-expected Japanese wage data. Amid the renewed greenback pessimism, both Société Générale and ING appear cautious on how much further this short-term trend can extend.
  • SocGen questions if USDJPY can fall much further "if the US economy remains robust, the Fed doesn’t ease much further and Treasury yields remain, essentially, rangebound". They, instead, see a "short-term solution [of] selling EURJPY [...] where the deterioration in Eurozone growth expectations relative to Japan is striking". SG have been arguing in recent weeks that relative growth expectations matter more than relative rates.
  • ING meanwhile think markets are "under-pricing the risk of a more prolonged trade spat" between the US and China as AUDUSD has "erased its short-term risk premium", concluding "the new layer of uncertainty generated by this tariff scare argues against a sustained dollar decline".