Oil Rally Drives FX Trends: What's The Trade? - SocGen

Oil Rally Drives FX Trends: What's The Trade? - SocGen

21 April 2016, 16:08
Vasilii Apostolidi
0
41

Oil prices are higher again, and so too are iron ore prices...With BHP warning of a near-term, correction (downwards) and with output of iron ore soaring, the rally should be treated with a bit of caution, but it’s going to go on supporting the Australian dollar for now.

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The oil price rally by contrast has better foundations as the supply/demand imbalance is slowly being resolved and while the upside is limited, confidence that the cycle has turned is growing and that will remain a big FX driver.

We're long AUD/NZD* and the iron ore bounce should help, and short USD/CAD, EUR/RUB and GBP/NOK, all trades which get help from rising oil prices.