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17 Sep 2013
Flash: More cautious on USD longs after Summers - Nomura
FXstreet.com (Barcelona) - Following the Summers' bombshell, one that is seen as a change for a less hawkish Fed in the future course of monetary policy, Jens Nordvig, FX Strategist at Nomura, notes this development makes them more cautious in terms of long USD exposure.
Key Quotes
"At this juncture, we are inclined to flip long USD/JPY into long GBP/JPY. We are exiting USD/JPY essentially at our entry point (just below 99) and we are adding long GBP/JPY at around 157.60, instead (we add $10m in our model portfolio)."
"We are also concerned over risks associated with the 18 September FOMC statement and Bernanke press conference. A small ($10-15bn) amount of tapering is widely expected. Therefore, we believe such a tapering announcement would hardly have a market impact at this point."
"Instead, the market moving news is likely to come from enhanced forward guidance, which is less uniformly expected by the market currently. Our view is that a clarification on the FOMC's intended plans once it reaches the 6.5% unemployment rate threshold is the most likely type of enhancement. Specifically, some clarification of the Fed’s reaction function to a scenario of below 6.5% unemployment but below-target inflation may be the most likely option. Such an outcome may have some positive impact on short rates, and also feed into some USD weakening."
Key Quotes
"At this juncture, we are inclined to flip long USD/JPY into long GBP/JPY. We are exiting USD/JPY essentially at our entry point (just below 99) and we are adding long GBP/JPY at around 157.60, instead (we add $10m in our model portfolio)."
"We are also concerned over risks associated with the 18 September FOMC statement and Bernanke press conference. A small ($10-15bn) amount of tapering is widely expected. Therefore, we believe such a tapering announcement would hardly have a market impact at this point."
"Instead, the market moving news is likely to come from enhanced forward guidance, which is less uniformly expected by the market currently. Our view is that a clarification on the FOMC's intended plans once it reaches the 6.5% unemployment rate threshold is the most likely type of enhancement. Specifically, some clarification of the Fed’s reaction function to a scenario of below 6.5% unemployment but below-target inflation may be the most likely option. Such an outcome may have some positive impact on short rates, and also feed into some USD weakening."