3 Apr 2015
Morgan Stanley: USD no longer trading as an asset currency – eFXnews
FXStreet (Barcelona) - The eFXnews Team shares Morgan Stanley’s view on the US nonfarm payrolls release, and the exhibited behaviour of USD currently.
Key Quotes
“Friday’s release of the US March labour market report will have even greater market significance after Fed Chair Yellen placed the importance of labour market strength over short-term inflationary expectations last Friday.”
“Markets might assume that a June rate lift could materialise if the next two NFPs come in strong (Our US economists expect a below-consensus 195k NFP this week).”
“Indeed, over recent weeks USD has increasingly traded in response to US rate expectations, drifting away from the previous pattern of currency moves determined by relative nominal GDP growth differentials. …and what it means for markets: This emphasis on relative rate expectations has an important side effect, namely USD is no longer trading as an asset currency.”
“Only a few weeks ago the relationship between the performance of USD and risky assets was strongly positively correlated, but this correlation has collapsed over recent weeks.”
Key Quotes
“Friday’s release of the US March labour market report will have even greater market significance after Fed Chair Yellen placed the importance of labour market strength over short-term inflationary expectations last Friday.”
“Markets might assume that a June rate lift could materialise if the next two NFPs come in strong (Our US economists expect a below-consensus 195k NFP this week).”
“Indeed, over recent weeks USD has increasingly traded in response to US rate expectations, drifting away from the previous pattern of currency moves determined by relative nominal GDP growth differentials. …and what it means for markets: This emphasis on relative rate expectations has an important side effect, namely USD is no longer trading as an asset currency.”
“Only a few weeks ago the relationship between the performance of USD and risky assets was strongly positively correlated, but this correlation has collapsed over recent weeks.”