Forex Flash: Currency markets pricing into prolonged US recovery – ANZ

FXstreet.com (Barcelona) - The lack of global growth momentum remains the key challenge to our core currency views. As a consequence, our trades remain currency-specific in nature. According to the ANZ Research Team, “Several factors, however, are signaling that the move to Dollar strength is mature. Trends in ANZ’s China Commodity Index imply that China tightening fears are likely to diminish at the margin, the UK is less comfortable with a weaker GBP, Europe has delivered its latest bailout (albeit indelicately), and positioning on the ‘dollar has turned’ view seems very significant.”

The one missing ingredient is a sense that the global recovery is balanced. At present market views seem to expect a US domestic recovery, coupled with stagnation elsewhere. As the US runs into its own fiscal headwind, we expect those expectations to converge. Some stronger data in Asia, coupled with BOJ disappointment on April 4, would be a combination useful to our medium-term views.