No major change, we now expect the Greenback to rotate in the 101-106 area as the Fed’s rate path becomes the most important focus of FX markets i.e. we believe 101-105 is around fair value until the next economic chapter reveals its hand. At MM we continue to believe the $US is one of the major keys to equities through 2023/4 with it likely to exert a neutral to a mildly negative influence on risk assets if we do see a rotation back towards 105.
- A rotation back towards the 105 area would dovetail with a bounce by bond yields and a pullback in precious metals.
MM remains neutral toward the $US around 101.50
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The Euro tested fresh 12 months highs last week as the region became an investment area of choice, similar to our view across bonds and gold we can we see a correction from current levels but we believe it would be one to buy if it does unfold.
- We can see the Euro back below towards the 1.05 area over the coming months as it takes a rest on the upside.
- From a risk/reward perspective we like this European currency into fresh 2023 lows and would not consider being short aka gold.
MM is neutral towards the EURUSD short term
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