Sees USD fall running out of steam

Morgan Stanley has checked in with their thoughts for the currency markets.

  1. USD: They see the USD fall running out of steam. The catalyst? Either better US data, or other CBs fighting back against their stronger currencies.
  2. JPY: Having said the USD will run out of steam, they are staying bullish the JPY. Their reason is on expectations that weakness in risk appetite will re-emerge. They also feel the undervaluation of the JPY and repatriation flows by pension funds for the aging population should also support the JPY
  3. GBP. Use rebounds to sell. They view the GBP as a highly risk sensitive currency. So as risk appetite turns around (i.e. gets weaker), so will the GBPUSD move back lower. Brexit remains an undertone for the currency. Retail sales a focus later in the week
  4. CAD. Oil dependent but neutral.
  5. AUD. Bearish. CB driven weakness. Rebounding iron ore prices and stronger labour markets have been supportive. But now the question is "Is the higher currency hurting competitiveness of exporters?" MS believes the RBA has room to cut rates further if it feels the need and that should keep the currency pressured.
  6. NZD. More pain to come. Bearish. They see the NZDUSD reaching toe top of the range at 0.6880. With risk expected to turn around, so will the NZDUSD. In addition, the RBNZ has room to push back against currency strength.

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