MUFG sees greenback beneath stress as price reduce bets, low volatility increase carry trades

MUFG says political, Fed uncertainty maintaining danger premium in USD; carry trades acquire

MUFG says the US greenback is holding onto a better danger premium as traders weigh lingering uncertainty over a possible dovish shift within the Federal Reserve’s management and contemporary considerations about political interference in US financial information. The warning comes regardless of a latest easing of commerce coverage dangers.

The financial institution famous that final week’s US CPI information left the door open for the Fed to renew price cuts as quickly as subsequent month, a prospect that has contributed to near-term greenback softness.

In FX markets, carry-trade currencies have been among the many important beneficiaries, supported by an ongoing decline in market volatility. MUFG identified that key measures of FX volatility have dropped to their lowest ranges in additional than a yr, additional bolstering demand for higher-yielding currencies.

This text was written by Aaron Cutchburt at investinglive.com.