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Risk Sentiment Sours


Off Best Levels


Better Bid


Rupiah Goes Offered Amid Omicron Worry


Battle Lines Drawn Ahead Of NFPs

FOREX: VIEW: J.P.Morgan note that "the USD H2 outlook will be determined 1st by
the speed, extent & quality of the global econ revival. We are more open to the
idea that USD is susceptible to further albeit bounded, tactical weakness, than
we are to a full-blown structural retreat. Differentiating between FX in a
protracted 0-interest rate world will fall to assessments of speeds of growth
recovery, unconventional policy differentiation, deficits & valuation. US
political betting markets shifted towards a baseline Democrat sweep in Nov. A
simple unwind of Trumpism could mean the USD 3-7% lower, tail risk for a larger
swing towards progressive policies driving the post-Covid-19 recovery. Other
wildcards are 2-sided & include different paths the epidemiological crisis could
take, European politics & Brexit as well as fiscal mini-cliffs. Last week
illustrates that the USD & FX liquidity remains asymmetrically more sensitive to
risk-off moves. We recommend only selective exposure to high beta FX & keep
overall USD exposure light. Stay long NOK vs. CAD & GBP on a basket basis as a
high quality play. Unwind exposure to SEK longs on infection surge. Stay short
GBP vs. EUR & NOK; Rotate short GBP/SEK to short GBP/CHF."
MNI London Bureau | +44 0203-865-3809 |
MNI London Bureau | +44 0203-865-3809 |