Markets continue to remain volatile – TDS

Analysts at TD Securities note that the USD continues to trade on its front foot as trade ambiguity – and threats – should keep it elevated.

Key Quotes

“Ongoing Italian tumult should prevent the EUR from achieving escape velocity for now. This backdrop also elevates the bid for surplus reserve currencies; here, the JPY fits the bill and its sensitivity to EM wobbles has bucked the G10 trend (unlike the dollar bloc currencies and EUR).”

“We continue to shun the dollar bloc currencies as their sensitivity to EM carnage is not only high but their loss of carry advantage vs. the USD keeps their return profile asymmetrically skewed lower - even if the data performs.”

“Though AUD flags cheap on our HFFV estimate, we cannot bring ourselves to touch this currency with a ten foot pole. Instead, we think a fade the rally stance is appropriate and we won't reconsider until the cycle lows have been observed.”