FXStreet (Bali) - Greg Gibbs, FX Strategist at RBS, shares his view on the FX market, noting that USD still offers buy opportunities vs the EUR and JPY.
"We would buy USD vs. EUR and JPY even though it feels like a patience trade. As discussed last week, we think the market is underpricing the risk of hikes in the US, whereas policy is likely to generate low rates in the Eurozone and Japan for much longer."
"The GBP has had a run on higher rate expectations; the risk is that this cools somewhat after the lower-than-expected inflation reported last week and focus on macroprudential measures this week in the UK."
"The prospect of further steady improvement in US economic data this week and a higher PCE deflator, in line with higher US and Canadian CPI last week, may see US yields creep higher, particularly at the front end, in my view."
"Record low FX implied volatility and similarly low credit spreads suggest high yield currencies may continue to grind higher, but EM markets are struggling to rally despite the risk-positive environment."