Dollar Bulls or Risk Aversion – Investec
Research Team at Investec, notes that yesterday's market reports that
German company Bayer were to make an all-cash bid of $62 billion Dollars
for US based Monsanto (to create the world's biggest supplier of farm
chemicals and genetically modified seeds) failed to drive the Euro lower
in yesterday's trade.
“Such a deal, if it were to go through, could certainly see flow driven moves sending the Euro lower against the greenback as we head into a big month in June, where not only could the Dollar benefit from the uncertainty of the EU referendum vote, but also there is a growing chance the Federal Reserve may again raise interest rates.
Comments yesterday from Fed members Bullard and Williams were a little less hawkish than last week's Fed speakers but still they retained the rhetoric that June is a live meeting for raising interest rates in the US. The market awaits Fed chair Janet Yellen's speech on Friday for further clues.
The US Dollar continues to perform well across the board, although with the Yen also seeing strength, this could be more safe-haven flows than Fed expectations - particularly with the oil price retreating a little from the $50 a barrel barrier as Canada resumes production after recent wildfires. The Dollar is also gaining in the emerging market space, which could in part be attributed to some risk-aversion in financial markets. Then again, the market continues its scramble to price in potential Fed rate action, and while that happens the US Dollar will see the benefits.”