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Currencies move to frontline of trade war
Given that unilateral FX intervention rarely works, the best hope for a weaker dollar probably comes either through: a) agreeing to a trade deal that secures positive re-rating stories in Europe and Emerging Markets or b) the Fed delivering a much deeper easing cycle than that priced by the markets. Neither of the above looks imminent and warns of another tricky 1-3 months for risk assets. We expect European FX (ex CHF) to stay soft on the back of i) ECB easing, ii) No Deal Brexit fears culminating in October and iii) uncertain Italian politics. EUR/USD should continue to threaten a break under 1.10 and Cable under ... (full story)