• FxWirePro: Euro crosses trade recommendation ahead of European politics

    Source: FxWire Pro - Geo Politics / 05 Apr 2017 09:11:36   Eastern Standard Time

    German politics: Merkel’s CDU is a clear winner in Saarland election, with AfD getting only 6% of the vote.

    Elsewhere, Centrist Emmanuel Macron kept his position as favorite to win France's presidential election after a televised debate on Tuesday night in which he clashed sharply with his main rival, Marine Le Pen, over Europe, just 19 days before the election.

    Macron was seen as having the best political program, according to a snap survey that also placed him as the second most convincing performer in a four-hour marathon that involved all 11 candidates.

    Criticizing Le Pen, the leader of the National Front who wants to leave the euro, hold a referendum on European Union membership and curb immigration, Macron said: "Nationalism is war. I know it. I come from a region that is full of graveyards.

    While ECB speakers push back against speculation of a first rate hike in late 2017.

    Euro-area core inflation fell sharply in March, but Easter-related noise may be partly responsible

    Economic data remain firm

    Shifting global growth dynamics remain relevant for currency markets and data this week reinforces that growth in the rest of the world is still getting upgraded relative to the US. This dynamic, combined with poor April seasonals, biases USD weaker in the near-term but we keep outright dollar exposure light given already-cheap valuations.

    A constructive global growth backdrop should also be supportive of high beta currencies. Maintain modestly long pro-risk exposure via long positions in AUD and ILS.

    Stay long EURUSD given still strong economic momentum and cheap long-run valuations, but take profits on the short EURUSD call. Maintain other long positions in European currencies versus the dollar bloc, specifically USDCHF and NZDSEK.

    We keep longs on several European currencies—CHF, CZK and SEK—all primarily motivated by idiosyncratic bullish factors and all held vs. EUR.

    Short EURSEK was held via a covered put to earn time decay, but we take profits on the put this week.

    UK data continued to soften this week. Short GBPUSD was stopped out at a loss but keep short GBP vs. EUR.