Abnormal carry advantage adds to the appetite for the dollar. The USD is now the highest yielding reserve currency, and its differential has extended to a circa 15-year high. As a result, there are several low carry, high beta FX that one can be long USD against for cheap defensive protection. Also, the latest global PMI data shows that growth momentum remains in favour of dollar exceptionalism-lite. We recommend sticking to long dollar and swiss francs vs euro and pound trades. We have lowered our GBP/USD target to 1.05 from 1.10 as the pound is set to be vulnerable to ballooning U.K. twin deficits. - J.P. Morgan Strategy
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