15 Jan 2014
Flash: Look out for bottom or top end of ranges on US data - BMO Capital Markets
FXstreet.com (Guatemala) - Stephen Gallo, European Head of Currency Strategy at BMO Capital notes the price action related to data release and the tapering from the US for the USD.
Key Quotes:
"There is one unique attribute of long-term US yields and the USD which participants should keep in mind, however. From time to time, the Fed taper and better US data generally add some support to US yields and the USD. However, that support generally occurs at the bottom end, not the top end, of the observed ranges."
"The Fed didn’t announce the taper when the DXY was at 85.00. It announced the taper when the DXY was at 80.00. The recent hawkish Fed-speak came when US 10s were below 290bps, not above 305bps. We think it will take more time, more jawboning and more of the Fed ‘looking for the sweet spot’ before the USD can begin a substantive leg higher. For now the USD is a ‘gentle’ buy on dips as US yields adjust back up a bit."
Key Quotes:
"There is one unique attribute of long-term US yields and the USD which participants should keep in mind, however. From time to time, the Fed taper and better US data generally add some support to US yields and the USD. However, that support generally occurs at the bottom end, not the top end, of the observed ranges."
"The Fed didn’t announce the taper when the DXY was at 85.00. It announced the taper when the DXY was at 80.00. The recent hawkish Fed-speak came when US 10s were below 290bps, not above 305bps. We think it will take more time, more jawboning and more of the Fed ‘looking for the sweet spot’ before the USD can begin a substantive leg higher. For now the USD is a ‘gentle’ buy on dips as US yields adjust back up a bit."