It is time to add long term optionality in USD hedges in order to preserve profit potential in the event of a lower EUR/USD.
We have highlighted that while the EUR/USD is expected to remain trendless throughout 2013, relative monetary policy (Fed QE exit) suggests medium-term downside risks have risen significantly. When the Fed stops easing, the U.S. dollar tends to appreciate, and we see potential for the first cyclical dollar uptrend in years not driven by market stress. However, a stronger dollar trend likely requires the U.S. money market to price in Fed hikes, which on the other hand means that a trend is not imminent. A window of opportunity exists in the coming months to evaluate dollar exposure and hedges.
To Read the Entire Report Please Click on the pdf File Below.