G10 FX: The $200bn Question - TDS

G10 FX appears to have hit the pause button as focus now shifts to the US/China trade dispute where a decision is expected today on the $200bn worth of goods that could be subject to additional tariffs, points out Mazen Issa, Senior FX Strategist at TD Securities.

Key Quotes

“Unless cooler heads prevail, we suspect the USD could remain elevated for as EMFX vol sits near the 2016 highs.”

“That said, fresh catalysts are needed to drive meaningful gains. We note that there are some signs that USD run is looking long in the tooth.”

“Notably, data momentum vs. the rest of the world has ebbed and the relationship between the broad USD and rate spreads has begun to loosen.”

“CTA positioning is skewed to longs and the USD is broadly expensive on a HFFV basis.”