USD: Analyst Expectations Appear Tilted Towards Further Greenback Weakness
Apr-24 09:58
While we have seen a resumption of dollar weakness today, the USD index remains ~1.5% off Monday lows. Short-term positioning dynamics will have likely assisted the bounce, however, analysts remain open to the idea that the greenback weakness could have room to extend:
- *Deutsche Bank believe the pre-conditions are now in place for the beginning of a major dollar downtrend. Their forecasts foresee the end of a "higher for longer" dollar with EUR/USD appreciating closer to purchasing power parity of 1.30 over the remainder of the decade.
- They highlight three key aspects; a reduced desire by the rest of the world to fund growing twin deficits in the US; by extension, a peak and gradual unwind in elevated US asset holdings ; and a greater willingness to deploy domestic fiscal space to support growth and consumption outside of the US.
- *Goldman Sachs' Chief Economist Hatzius has published an opinion piece in the FT this morning arguing that "reluctance by non-US investors to add to their US portfolios" will weigh on USD going forward amid GS seeing the US "unlikely" to outperform during the next couple of years - this led him to conclude that Dollar weakness "has considerably further to go."
- *BBVA see that "market reactions suggest short USD positioning is crowded, which could amplify the profit-taking seen yesterday. Markets will continue to be driven by Trump headlines, but a prolongation of the short-term reversal in the USD index towards the 102/103 resistance area looks like an opportunity to short the index again."
- *Danske take a similar view, seeing "In the near term, concerns about US asset confidence and a recession will support [EURUSD]. Longer term, structural challenges like US political shifts, the trade war, and capital rotation away from US assets suggest significant USD downside."
- *ING think "Trump needs to keep feeding markets with positive news to fuel further dollar gains from here".
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EGB SYNDICATION: France: 0.95% Jul-43 OATei tap: Spread set
Mar-25 09:46
- Spread set: 1.80% OATei RY +10bps (Guidance was + 12bps area)
- Size: EUR Benchmark (MNI expects E3-4bln)
- Books in excess of E37bln (inc E2.8bln JLM interest)
- Settlement: 1 April 2025 (T+5)
- ISIN: FR001400QCA1
- Bookrunners: BNPP / CITI(B&D and DM) / CACIB / JPM / MS / SG
- Timing: Books to close at 10:15GMT / 11:15CET, allocations and pricing later today
From market source / MNI colour
EQUITIES: Large EU Bank put spread
Mar-25 09:44
SX7E 155/150ps, bought for 0.30 in 20k.
EGBS: Bund Weakness Extends; Issuance and Equity Uptick Weighing
Mar-25 09:39
Bund futures have narrowed the gap to initial support at 127.88, with no discernible headline trigger noted for the latest round of weakness. Impending Bobl supply alongside heavy corporate issuance will likely be weighing on EGBs this morning, alongside a recovery in European equity futures. Bunds are -32 ticks at 127.95 at typing.
- The German curve has bear steepened, with 2-year yields up 2.5bps and 30-year yields 4bps higher.
- The March German IFO survey provided a more positive outlook than yesterday’s PMIs, with the expectations component stronger-than-expected at 87.7 (vs 87.3 cons, 85.6 prior).
- The Bund-led nature of the selloff sees 10-year EGB spreads biased tighter. 10-year DSL supply was digested smoothly.
- ECB’s Kazimir and Muller did not deviate materially from past remarks, the latter adopting a hawkish tone around the case for future rate cuts.
- ECB’s Holzmann, Vujcic and Nagel are scheduled to speak later today.
