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Fed in process of sustainable divergence vs ECB, BoJ - RBS

FXStreet (Bali) - Greg Gibbs, FX Strategist at RBS, shares his view on FX, noting that USD strength vs EUR, JPY continues as monetary policy appears to be in the process of a fundamentally sustainable divergence.

Key Quotes

"The power of the USD rally against EUR and JPY builds and is based on a very basic, strong and obvious premise - monetary policy appears to be in the process of a fundamentally sustainable divergence."

"The price action post FOMC highlights that this is an important trend change. Shorter term speculative traders are starting to learn that fading this move is a painful experience."

"The case for long USD positions against other currencies is less clear, but still on balance bullish."

"The slowdown in Chinese economic activity is likely to dampen growth for commodity producers and Asian economies. As such, we might expect a relatively stronger US economy and higher US rates compared to those in Asia."

"Perhaps the degree to which rates ultimately are raised in the US will be reduced by a stronger USD."

"Easy global monetary conditions are likely to help support global growth, including growth in the US."

"It may also continue to see global asset markets remain buoyant and encourage a search for diminishing yield."

"Such considerations may slow the USD advance against some currencies, but presumably not turn its broad rising trend.

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