USD: plenty of upside room - Scotiabank

By FXstreet.com | July 25, 2014 AAA

FXStreet (Córdoba) - Camilla Sutton, analyst at Scotiabank notes that markets dynamics are changing toward broad USD strength and there is plenty of upside room.

Key Quotes

“The first half of 2014 was marked by the lack of a broad movement in the USD; instead the focus was on the domestic stories; with NZD rallying on RBNZ policy, GBP on strengthening domestic fundamentals, JPY on shifting expectations for the BoJ and firming inflation; while others were weak, like SEK and NOK. However since the end of June currencies have broadly shifted towards USD strength which warns of an overall change in market dynamics”.

“The DXY is higher and trading above its average level; however still not above its June highs, accordingly if we are in the midst of a shift there is plenty of upside room”.

“Some of the broad strength is on the back of rising geopolitical risks but the fundamentals are also at play with US labour markets and inflation firming the relative interest rate story is increasingly important”.

“The key will be the developments at the Fed next week. It is likely too early for a broad and strong USD rally; but for some currencies, like EUR, we appear to be at the beginning of a new (and long awaited) downward slide”.

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