Some nice charts on why the DXY bull market is not over from The Market Ear.
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| EUR: Lower for longer |
| GS FX does not think the recent recovery in EUR/USD is not entirely justified by the news flow and are tempted by the 10:1 payout on 4m EUR/USD 0.95 puts. GS FX: “The next 6 months seem likely to be challenging for the Euro area, which is likely to keep EUR/USD close to parity. Our economists now expect the Euro area to be in recession in the second half of this year; spot data are already slowing materially and further production disruptions are likely. Most critically, with natural gas supplies from Russia well below normal, it will require some form of demand destruction—through some combination of higher prices and government policies—to make it through the winter, even if storage tanks are full. We think the recent move lower in EUR/USD reflects this shifting growth outlook, and is likely to extend somewhat further given the continued downside risks to activity from more severe gas disruptions and the scope for a much deeper downturn. We are revising down our 3m and 6m EUR/USD forecast to 0.99 and 1.02 (from 1.05 and 1.10 previously)” (GS FX) | |
| USD and FED meetings |
| The USD has tended to fall in the first few days after Fed meetings this year, but that weakness hasn’t proven durable |
 JPM FX | |
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| That inflation moderation |
| GS: “The market is implying a faster moderation in inflation over the next year than our economists anticipate” |
 Goldman | |
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| Treasuries scream US recession |
| JPM: “After this week’s decline, the level of Treasury yields would be justified if we lowered our growth forecasts by 9%-pts, consistent with the US economy entering a recession” |
 JPM | |
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