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May 04 - 12:55 PM

USD: A Regime Shift In FX Volatility And USD Trend Are The Latent Shocks Waiting To Happen In H2 - Danske

By eFXdata  —  May 04 - 10:45 AM

Danske Research sees a scope for regime shift in FX volatility and USD trend in H2.

"Looking ahead, the shift from a 'forecast'- to 'outcome'-based Fed will drive regime shifts in FX volatility and correlations, not be a factor of stability. In FX, this shift has already been a driver of 1-3M FX trends as uncertainty prevails across how and when Fed will react to improving US data," Danske notes. 

" In our view, a regime shift in volatility and the dollar trend are the latent shock waiting to happen in H2. We think markets can revisit 1.21-1.22 in the very short-term but these considerations also add up to dollar shorts being a macro trade living up to the name of carry trades: it is tantamount to picking up pennies in front of a steamroller," Danske adds.

Danske Research/Market Commentary


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