Morgan Stanley suggests that the USD rally is tactically overextended and vulnerable to a reversal, recommending long FX volatility as a superior hedge over USD exposure.
Key Takeaways
- 1.The USD rally is technically overstretched with significant positioning buildup.
- 2.Market pricing for the Fed is inconsistent with economists' base case of no hikes this year.
- 3.Long FX volatility is a more attractive hedge than long USD given potential for noisy Fed repricing.
Table of Contents
- Key Takeaways
- Currency & Foreign Exchange
- Global Macro Strategy Team
- Disclosure Section
- Analyst Certification
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Authors
David S. Adams, CFAAndrew M WatrousMolly NickolinKoichi Sugisaki
Securities
EURUSDUSD/CADGBPUSD
Themes
Fed Policy Repricing
Regions
GlobalUnited States