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17 Dec 2013
Flash: Tapering tactics: USD-centric - HSBC
FXstreet.com (Córdoba) - The USD, rather than FX crosses, is central to any taper-related trade around this week's FOMC meeting, says Daragh Maher, Senior FX Strategist at HSBC. "But FX will be a follower rather than a leader, taking its cue from the initial reactions of bond and equity markets".
Key Quotes
"There is an unusual degree of uncertainty surrounding this meeting about the likely bond and equity market reaction to any given decision".
"In positioning, therefore, you need to decide not only if they will taper but also whether such a taper, alongside any other announcements, will prove traumatic or tranquil".
"EUR/USD and USD/NOK may be the best plays in G10 as they have a high correlation both to bond yield differentials and to the 'risk on-risk off' factor".
"The AUD and NZD are the best plays if you expect tapering, but anticipate its adverse impact will be more evident in equity rather than bond markets".
Key Quotes
"There is an unusual degree of uncertainty surrounding this meeting about the likely bond and equity market reaction to any given decision".
"In positioning, therefore, you need to decide not only if they will taper but also whether such a taper, alongside any other announcements, will prove traumatic or tranquil".
"EUR/USD and USD/NOK may be the best plays in G10 as they have a high correlation both to bond yield differentials and to the 'risk on-risk off' factor".
"The AUD and NZD are the best plays if you expect tapering, but anticipate its adverse impact will be more evident in equity rather than bond markets".