USD: Time To Be Selective
Danske Research discusses the USD outlook and prefers a selective approach in picking USD longs over the coming months.
"Into the summer, currencies may have to balance trade and emerging
market virus woes on the one hand versus a continued smooth reopening of
Western economies on the other. In this environment, we believe
the broad USD will trade on a strong footing, not least in light of the
rising risks of a scrapped US-China trade deal," Danske notes.
There is a risk that reflation could gain traction on positive virus news ahead and past easing (USD negative), but we find the short-term risk-reward for renewed broad USD strength more attractive after all. That said, we think it's important to selectively distinguish between funding currencies and, in light of our very near-term bullish EUR view, we instead prefer the likes of the SEK, AUD and JPY," Danske adds.