Goldman Sachs on the US dollar.

Give 3 main reasons why USD strength could continue:
1. Says the market is not overly long USD positions "the truth is that the Dollar is 'over-talked, but under-positioned"

2. There is further downside room in the EURUSD, despite arguments that the downside is limited

3. The probability of further BOJ easing is rising "given the falling trend in underlying inflation, which means that the annual average inflation this fiscal year is likely to dramatically undershoot the median expectation of policy board members"

Further on the BOJ - GS chief economist for Japan Naohiko Baba:

  • Is looking for "a variant of 'Operation Twist'"
  • Says this may come as early as the July BOJ meeting
  • "We think markets will front-run this in USDJPY, once the severity of the Japanese inflation undershoot becomes fully understood"