The dichotomy of strong jobs data versus weaker headline growth was exacerbated by the June nonfarm payroll report, notes BNP Paribas.
“Persistent job creation makes the GDP rebound in Q2 and/or Q3 more likely and we believe this will be reflected in higher US Treasury yields and a stronger USD. The data calendar is light in the coming week, but the minutes from the June FOMC meeting could deliver a more balanced message concerning the dovish market interpretation of Chair Yellen’s press conference,” BNP argues.
“USD/JPY longs are particularly attractive now to position for dollar bullishness amid rising Japanese investor outflows,” BNP advises.
Menawhile BNP thinks that as the ECB held rates steady in July, the impact of the June easing action likely to lag.
“We believe the EUR remains an attractive selling proposition,” BNP argues.
“Any further evidence of slower activity in incoming data will also weigh on the EUR and we remain short EURUSD and EURGBP in our recommendations portfolio,” BNP advises
BNP stays long USD/JPY with a 105.50 target, short EUR/USD with a 1.32 target, and short EUR/GBP with a 0.78 Target.