Fade USD Gains Vs EUR, JPY; Buy USD Dips Vs CAD, AUD - BNPP
US rates markets continue to adjust gradually towards pricing greater chance of a Fed rate hike this summer and the risk environment remains healthy, with the S&P 500 and the front WTI contract both pushing higher.
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Continued gains in US frontend rates without an offsetting retreat in equity and credit markets, would be broadly supportive for the USD.
However, we suspect that USD gains themselves will ultimately undermine risk appetite given linkages back to financial markets via commodity prices and USDCNY expectations.
We remain inclined to fade USD gains vs. the EUR and JPY accordingly, while see more scope for the USD to gain momentum vs. risk sensitive currencies like the CAD and AUD.
