By eFXdata — Oct 04 - 01:30 PM
TD Research discusses the USD outlook and likes to stay sidelined in the near-term.
"A new week brings the same risk factors but market pricing seems to have settled a touch. The markets remain focused on the rising downside risks to China, and broader global growth, at the same time as the Fed dials back emergency stimulus. In short, real rates have been rising amid a supply-side induced deceleration in global growth," TD notes.
"The key for markets in the weeks ahead is to sort out the extent of the risk premium already priced in versus how these factors play out. We think there's a lot of bad global news priced into the USD, especially as our positioning and high-frequency fair valuation tools point to USD extremes. The USD also holds a steep premium on our Global Macro PCA framework. While the near-term USD bias leans higher, we're wary about chasing the move at these levels," TD adds.
TD Bank Research/Market Commentary