Yellen-Induced Carry Trade At A Tipping Point: What's The FX Trade? - TD

We think the Yellen-induced carry trade is close to reaching a tipping point. For sure, it seems unlikely a fresh USD rally will exceed the highs seen over the past two years. Even so, we think in broad terms we can still see the greenback eke out narrow gains against most of the G10 over the next quarter in line with our forecasts. We expect the improvement in US fundamentals (housing, employment, and consumer growth) and steady rise in core inflation will lead to further tightening in Fed policy this year. We have higher conviction levels that the commodity-sensitive currencies are more at risk than the European currencies given ...READ MORE