Nordea FX: A 20% stronger US Dollar on the cards?

imageForex2 hours ago (Mar 22, 2021 10:48)

© Reuters.

By Samuel Indyk – Is a 20% stronger USD on the cards? That’s the question posed by Nordea analysts Martin Enlund and Andreas Steno Larsen who ask whether the USD should be rising 20% year-over-year instead of falling 15%.

Since the end of last year, economists, central banks, governments, and others have been lifting 2021 growth expectations as vaccine rollout quickens and economies begin to reopen. However, this is particularly evident in the US. According to Bloomberg data, the consensus at the end of the last year was for the US to grow just under 4% in 2021, the current forecast is 5.5%. The same cannot be said for the Eurozone with economists now expecting slower growth this year than they had previously.

“In terms of relative growth forecasts, or in term of revisions to said forecasts, the USD should be in a very strong spot – rising 20% YoY instead of falling 15% YoY,” Enlund and Larsen argue.

“We remain short EUR/USD with a target of 1.1750 and look for (at least) 2% in the United States 10-Year Treasury Yield already before summer.”

In the last week there has been rate hikes from Brazil and Turkey, the latter culminating in the governor of the Turkish Central Bank being sacked and a rapid fall in the Turkish Lira with USD/TRY close to its record high.

Nordea says they will not turn bullish on the Turkish lira while Erdogan is effectively running the central bank, adding that the renewed lira turbulence is a bigger issue for the EUR than the USD.

Nordea FX: A 20% stronger US Dollar on the cards?

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