– USD better supported this week amid dovish central banks
The USD is likely to remain better bid this week. This is likely driven by a number of factors. First, several central banks (RBA, BOE, and ECB) likely to sound more dovish at meetings, which should de-facto support the USD. Secondly, the USD could receive a risk-off bid given (a) fiscal and property tightening measures in the US and China respectively and (b) an increase in uncertainty over Italian politics. Our economists expect the ECB to revise down its inflation projection on Thursday, and look for a 25bps cut by the April meeting. Such a development could further support the USD this week. However, the biggest surprise this week could come from the BoE on Thursday. Only half the economists polled by Bloomberg expect further easing. With this not fully discounted, GBPUSD will likely break below 1.5000 this week. The strength in USD has seen the 1.0150 stop on our long AUDUSD recommendation triggered. We book a 1.48% loss including carry.
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BNP Paribas