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Apr 22 - 02:55 PM

EUR/USD: The Reverse Currency War; What's The Trade? - Danske

By eFXdata  —  Apr 22 - 12:42 PM

Danske Research discusses the reverse currency war and likes selling EUR/USD on rallies.

"Reverse currency war has been one of several arguments why we have favoured a stronger USD. One implicit way for the Fed to fight inflation is to tighten financial conditions in which the USD plays a role. Now the question is whether the ECB could strive at doing the same thing, i.e. hike policy rates in order to strengthen the EUR and limit imported inflationary pressures. Meanwhile, we are sceptical as to the ECB's ability to do so simply because we believe the ECB, unlike Fed, is fighting valuation-forces - or simply put fighting gravity," Danske notes. 

"Hence, we still prefer to sell ECB-induced rallies in EUR/USD and we would likely have to see a substantial change to the global real growth outlook for that view to change," Danske adds. 

Source:
Danske Research/Market Commentary

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