9 Apr 2014
Low inflation and a weak USD - BAML
FXStreet (Guatemala) - Athanasios Vamvakidis, FX Strategist at Bank of America Merrill Lynch asked the question, "How do you position for a strong US recovery, with low inflation and a weak USD?".
Key Quotes:
"How do you position for a strong US recovery, with low inflation and a weak USD? We have been bullish on the US economy, short US rates and long USD."
"Although the market has not proved us right yet, we are standing our ground. However, we also see a risk that low inflation could allow the Fed to take its time tightening, which could keep the USD weak, despite an accelerating US recovery."
"We believe that this is a low probability risk for the longer term, but may be a higher risk for the short term and, therefore, worth considering. How should US bulls position if they do not want to fight the Fed by being long USD?"
Key Quotes:
"How do you position for a strong US recovery, with low inflation and a weak USD? We have been bullish on the US economy, short US rates and long USD."
"Although the market has not proved us right yet, we are standing our ground. However, we also see a risk that low inflation could allow the Fed to take its time tightening, which could keep the USD weak, despite an accelerating US recovery."
"We believe that this is a low probability risk for the longer term, but may be a higher risk for the short term and, therefore, worth considering. How should US bulls position if they do not want to fight the Fed by being long USD?"