USD next one to hit lift-off - HSBC

FXStreet (Bali) - According to HSBC FX Strategy Team, the next currency to hit lift-off is the US Dollar as rate hike speculations keep growing.

Key Quotes

"First it was NZD, second it was GBP… the USD is next As New Zealand moved to raise rates – the currency rallied. As the market speculated about a UK rate rise – GBP rallied. In our eyes the next one to hit lift-off is the USD."

"Regardless of whether we actually get a rate rise or not the market will be perpetually looking in a hawkish direction. An important pinch point for us in the FX markets is what will happen to long rates."

"If they move up and also cause a generalised increase in volatility then EM will be badly hit – particularly the carry trades. This is not our central scenario and therefore the USD rally will be limited."

"We believe the best currency to sell against a resurgent USD is the EUR. Here we are seeing two economies, two inflation rates and two central banks heading in opposite directions."

"On this basis we think the USD is close to lift-off whilst the EUR is just about to hit a long downward slope.