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Trading The USD Shift - Morgan Stanley
The USD may replace its reflation related bid with safe haven related demand. This scenario suggests the JPY staying correctively strong for now,gaining on many crosses, while GBP and high yielding currencies may be hit as political and currency related concerns increase. Deflation tends to increase real yields of low yielding currencies, suggesting USDJPY may drift towards our 112.50 target. However, GBPUSD breaking lower will undermine any bid in EURUSD too. This applies even more when following the Carney argument of seeing a failure of UK-EMU negotiations leading to a disproportional increase in inner EMU ... (full story)