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Stay short EUR/USD and EUR/JPY - Deutsche Bank

Strategy from Deutsche Bank

Recent developments in EUR/USD point to a renewed deterioration in fundamentals across our two most important guiding frameworks - flows and real rates.

On the flow side , the basic balance - the sum of the current account, FDI and portfolio flows - remained negative but stable throughout last year as large portfolio outflows offset the current account. Flows have recently taken a turn for the worse however, this time driven by foreign direct investment (FDI) outflows. European appetite for foreign companies is picking up, and a similar message is given by our more forward-looking cross-border M&A monitor. The basic balance is now at its weakest post-crisis levels pointing to a EUR/USD break below 1.05 based on previous relationships.

On the real rates side, the recent Fed repricing has helped push near-term "fair value" back down below 1.10 , and it is our belief in the continuation of a Fed hiking cycle - however shallow - that is crucial for this rate spread to continue to widen.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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