Buy USD | Current Sentiment

Jarratt Davis

Special Consultant to the FPA
Ahead we have Retail Sales from the UK, which is unlikely to move GBP given the market’s preoccupation with referendum polls. We will also see minutes from the recent ECB meeting. Our general trade call going forwards will be to buy USD on pullbacks against weakening currencies, such as the AUD, NZD, EUR and JPY.

Current Sentiment:

The greenback continues to strengthen in the wake of the hawkish minutes which showed that a June 15 hike is very much on the table. The market was considerably mispricing the chances of a June hike and this was clear given the solid rise in core inflation measures and optimistic rhetoric from a slew of Fed members of late. Provided the data remains solid from the US, we will look to buy and hold USD heading into the June meeting.

Today’s Asia-Pacific session saw Employment figures from Australia which were largely a non-event; headline change marginally missed estimates with 10,800 jobs added, versus expectations of 12,000. Of the change, full-time jobs decreased by -9,300, while part-time rose 20,200, which adds negativity to the release. The Unemployment Rate did however remain at 5.7% which beat estimates of 5.8%, but participation dropped to 64.8% versus 64.9% prior. Overall the release adds little to the already negative outlook for AUD, with the RBA still likely to cut in coming months. AUDUSD is a solid short position hold into June, provided US data does not disappoint.

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