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Forex Flash: Increased flows into US assets need to justify deficit – ANZ

With the US current account deficit being almost entirely funded by Treasury flows in recent years, the USD has been among the largest beneficiaries of the dive into fixed income since 2008. Certainly there has been some ‘diversification’ into other countries’ bond markets, but we cannot recall another individual case where fixed income flows have been such a dominant part of the capital account. However, “With the external deficit still wide, flows into risky assets in the US (equities, corporate bonds and government corporate bonds) would need to return to pre-crisis levels, or even tech-boom type levels, to justify a risk-on style broad dollar rally.” suggests the ANZ Research Team.

Euro falters ahead of ECB announcement

The positive mood enjoyed by global financial markets failed to materialize in the FX market as the US dollar stands as the best performer across the board. European currencies weakened despite positive economic data as the upcoming ECB and the BoE announcements present modest downside risk for the euro and pound respectively.
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Forex: USD/CAD retreats from highs, around 1.0310/15

The Canadian dollar is picking up pace at the moment, leaving intraday lows against the greenback in the doorsteps of 1.0340 and dragging the cross to the current area of 1.0310/15....
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