Nomura strategists close out trade recommendation
Nomura said to buy the euro after the first round of the French election. The trade is up 6% and now they say it's time to head to the sidelines.
The decision to bail is all about interest rate differentials and what's priced in. The market is now sees an ECB hike in 2018 and a 50% chance of a second hike. That's aggressive and it doesn't leave much room for more, especially with the ECB suddenly skittish about EUR and yield moves.
Second, US data can't get any worse. It's been terrible all year except for jobs and confidence. More recently, there have been some good signs and they see the risk of more to come.
So they're going to the sidelines now but will look to buy a dip because they still see a possibility of 1.20.
...
I like it. I think that some good news for the US dollar is inevitable and it might start with this Friday's CPI report.
