15 Jan 2016
Staying bullish on the greenback - Deutsche Bank
FXStreet (Guatemala) - George Saravelos, analyst at Deutsche Bank, explained that the biggest risk to our dollar view is a significant slowdown in the US economy that stops (rather than decelerates) the Fed hiking cycle and potentially brings easing back on the table.
Key Quotes:
"Beyond that, portfolio flows, relative central bank cycles, and China’s recent willingness to tolerate more dollar strength all suggest the dollar has more scope to appreciate in 2016.
The latter is particularly important because past USD/CNY stability has prevented the broad trade-weighted dollar from appreciating as much as the narrow index given China’s high weighting.
Given our ongoing bearishness on RMB, we therefore prefer the broad over the narrow trade-weighted dollar, which also remains cheaper on account of CNY valuations. Indeed, even if the current dollar rally is faster than the late 1990s, it remains well within the bounds of previous dollar cycles. We remain bullish on the dollar while also looking for a move down to 95cents in EUR/USD by the end of the year."
Key Quotes:
"Beyond that, portfolio flows, relative central bank cycles, and China’s recent willingness to tolerate more dollar strength all suggest the dollar has more scope to appreciate in 2016.
The latter is particularly important because past USD/CNY stability has prevented the broad trade-weighted dollar from appreciating as much as the narrow index given China’s high weighting.
Given our ongoing bearishness on RMB, we therefore prefer the broad over the narrow trade-weighted dollar, which also remains cheaper on account of CNY valuations. Indeed, even if the current dollar rally is faster than the late 1990s, it remains well within the bounds of previous dollar cycles. We remain bullish on the dollar while also looking for a move down to 95cents in EUR/USD by the end of the year."