TD have a bullish bias for the US dollar for the weeks ahead, targeting EUR/USD under 1.05
Reasoning (in summary):
- bleak global growth outlook is particularly problematic for this pro-cyclical currency
- Politically, Europe continues to struggle to offer a unified front … fragmentation risks over the bloc have returned
- EUR's balance of payments - weakening basic balance of payments trend coming into this crisis. Now, with global trade having stalled, the EU's large trade surplus (read: Germany) puts the longstanding current account surplus at risk.
- Portfolio flows are not encouraging … QE ... lead to capital flow leakage … underway on the fixed income side. … high frequency ETF trends show limited interest in EU equities. In aggregate, the EUR can no longer compete in attracting foreign capital flows.
- Demand for USD assets began to surge in 2017. With the US a high yielder and the equity market the most defensive globally, foreign capital will continue to be directed towards the US. This is why think arguments that plentiful USD liquidity will lead to the USD's demise are on weak footing.
