USD unlikely to benefit from GDP revision amid geopolitical risk in Syria
The CHF and JPY have given back some of their recent gains as the prospects of military interventions in Syria are delayed. We expect that markets will remain sensitive to the headlines surrounding the potential international response to developments in Syria, but for now Brent crude oil futures are settling just under $116/bbl, while European equities are staging a rebound. Going forward, we assume that NATO military action is still the likely scenario even if relatively limited in scope. However, until there is more clarity on the geopolitical front, our bias is to keep positioning low. Given the near-term dominance of political headlines (where higher oil prices are a potential negative for the USD) we are reluctant to initiate new long USD positions at this stage. That notwithstanding, the USD appears somewhat cheap relative to interest rate differentials (see chart). As far as today’s US data is concerned, our economists expect a sizeable upward revision to Q2 GDP to 2.3% (sa, annualized) from 1.7% q/q.
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BNP Paribas