USD to remain king of FX without a positive EUR offset – TDS
08.07.2022, 14:20

USD to remain king of FX without a positive EUR offset – TDS

A strong and above consensus payrolls report offers a reminder that the US is still on a firm footing. USD strength this week has come off the back of a breakdown in EUR, and this narrative is set to continue, according to strategists at TD Securities.

Not the recession you are looking for

“A solid payrolls report calls into question the repricing of the fed funds curve since the June meeting and more recently, recession talk. While we see the latter as likely in the next 12m, the timing of this could be further than the market currently thinks. Consequently, we believe that the market is far too premature on betting on a lower and earlier end to the tightening cycle.”

“The economy is standing strong, especially compared to some of its G7 peers (like the Eurozone) and it will be very difficult to displace the USD – especially with the EUR to remain very weak.”

“EUR/USD came perilously close to hitting parity; and while we would expect that to offer some natural defense (particularly in the options space), the macro headwinds are immense in Europe and the balance of payments is experiencing an epic deterioration that is likely to continue. And without a EUR offset, the USD remains king of FX.”

 

 

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