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Forex pairs in this Article » EUR/USD (Barcelona) - Stephen Gallo, European Head of Currency Strategy at BMO Capital notes that the USD has rallied in a steady, orderly fashion since yesterday’s US retail sales print for December.

Key Quotes

“The move so far has been rather broad based, with some G10 currencies (like the AUD) falling more than others. The USD strength mid-week basically reflects two things. First: it reflects the degree to which the ‘Fed taper’ cycle is starting to weigh on various currencies as US yields firm up.”

“With the exception of the NFPs shakeout last week, the broader market has traded as if a ‘course has been set’ as regards underlying US growth momentum and Fed policy. Moreover, deploying key voting FOMC hawks post-NFPs suggests that the Fed basically wants to keep markets in a taper mentality for the time being.”

“We suspect the USD will retain its general bid tone within the London morning FX ranges, on the chance that a break back above 290bps in US 10s is fairly close.”
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