Investors following tactical strategies should consider buying AUD/NZD and selling EUR/JPY this week, advises Barclays Capital in its weekly FX pick to clients.
The long AUD/NZD is a tactical play around AU inflation release:
“We believe the risk around the AUD CPI data is asymmetric. The market looks overly dovish in its view on RBA policy rates and, if anything, an increase in the annual pace of inflation may help to undermine the market’s view. AUD stands to benefit from any repricing of market rate expectations and we look for the currency to move higher, especially versus NZD, consistent with our long AUDNZD trade idea,” Barclays clarifies.
The short EUR/JPY is a hedge for potential escalations in geopolitical risks:
“Not only does this trade offer protection against rising equity volatility, but it also fits with two of our major strategic views – that is, trend depreciation of the EUR has begun, and USDJPY has now peaked,” Barclays adds.