USD: Fall versus G10 currencies and some emerging market currencies over? - Natixis

René Defossez, Research Analyst at Natixis, notes that markets witnessed overall fall in the dollar versus G10 currencies and some emerging market currencies after fears of D. Trump being impeached.

Key Quotes

“The CHF has had the sharpest increase, playing once again its role of safe haven with EURCHF at one time below 1.09. The EUR has benefited from dollar weakness but also from strengthening speculation about a re-orientation in the ECB’s monetary policy at its meeting on June 8. EURUSD could stay around the current levels of 1.115 before the ECB’s meeting, and then correct to 1.09 in midJune when the Fed will be raising its policy interest rates. In this context, we will be paying close attention to the speeches of ECB and Fed members this week.”

“The GBP was supported by good figures (retail sales, employment) and the continuing outlook for a big victory by T. May in the June 8 elections that would allow her to negotiate better with the EU. We nonetheless remain doubtful about this rosy scenario. With the rise of populisms, the EU has nothing to gain from being too conciliatory in the negotiations which will be starting in mid-June. Likewise, we continue to be cautious about British growth, which should eventually slacken its pace. We also recommend buying EURUSD to bet on a return to 0.867.”

“The JPY also acted as a safe haven, falling below 111. It should eventually pick up to 113 under the influence of a stronger dollar as the Fed’s meeting draws near, and due to the reduction in fears of Trump being impeached. In the emerging markets, the BRL underwent a sharp correction after the new announcements of M. Temer’s corruption. This should weigh on Brazilian assets and on the BRL for a long time.”