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Jun 04 - 05:00 PM
USD: Fed Dovish Rhetoric Key Driver; GBP: Scope For EUR/GBP To Move Towards 0.90 - Danske
First appeared on eFXplus on Jun 04 - 03:15 PM

Danske Research discusses the USD outlook and sees the Fed's recent dovish comments as a key game changer for the USD near-term outlook. Dansek also sees a scope for EUR/GBP to move towards 0.90 if UK release a soft batch of data this month.

"USD sold off broadly after the Fed’s Bullard blinked late yesterday, when he argued a rate cut may be warranted soon. We have stressed numerous times that a key driver for FX markets would be if the Fed started to acknowledge dovish market pricing. Bullard’s comment was a first step in that direction, but the market likely needs more confirmation (and at some point action) for further selling USD," Danske notes.

"The GBP weakened against EUR yesterday Softer UK PMIs, compression of Italian sovereign spreads and marginally negative but not too surprising comments from Boris Johnson combined to send the GBP lower. If indeed we are about to see a weakening of domestic data in UK combined with euro spread compression, the EUR/GBP could move towards 0.90., although this is not our main scenario. Nonetheless, forecasters have been surprised by strong UK data and a turn towards weaker growth indicators could fuel some short-term headwind for the GBP, even if Brexit news is neutral," Danske adds. 

Source:
Danske Research/Market Commentary

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