Markets: Risk appetite remains well supported – TDS

Risk appetite remains well supported despite the latest escalation in the US/China trade war, according to Ned Rumpeltin, European Head of FX Strategy at TD Securities.

Key Quotes

“While the latest round avoided the worst-case scenario, we are starting to wonder whether trade tensions are now fully priced - or close to it. If so, then FX markets could be looking at a game changer heading into Q4, leaving the USD vulnerable going forward.”

“If correct, we think AUDUSD and NZDUSD could be prime candidates for a short squeeze in the weeks ahead. A floor may already be in place for both pairs.”

“The local macro and technical backdrops have started to look better while positioning looks stretched. We don't think it will take very much to send both higher.”

“The second half of the week reverts market attention to Europe. Brexit negotiations are approaching a new phase while the Norges Bank is widely expected to deliver a rate hike this week. This has us looking at interesting possibilities in EURGBP and NOKSEK.”