Credit Agricole: Resilient US data and soft landing narrative to bolster USD strength

<p>Credit Agricole shares insights on the recent
interplay of economic factors, noting a revived 'soft landing' narrative
and its potential implications for the forex market.</p><p>Key Points:</p><ol><li><p>Soft Landing Revisited: The beginning of the week
sees the 'soft landing' narrative reemerging, driven by data-centric
forward guidance from both the Fed and the ECB, and the US's
better-than-projected economic data. A soft landing scenario implies
that economic downturns will be mild, and recoveries will be swift,
minimizing economic shocks.</p></li><li><p>FX Impacts: The scenario is seen as favoring
pro-cyclical and higher-yielding currencies due to eased global
financial conditions and enhanced risk sentiment. Such a backdrop would
typically suggest a bearish outlook for the USD, given a reduced demand
for safe-haven assets.</p></li><li><p>USD's Strong Stance: Contrary to conventional
expectations, Credit Agricole postulates that the USD might flourish
under a soft landing framework. The bank stresses that robust US data
combined with a peaking Fed cycle could accentuate the allure of USD
assets. Furthermore, the USD's significant rate appeal could position it
as a sought-after carry investment currency.</p></li><li><p>Market Positions and Relative Value: Current FX
market trends show a short stance on the USD when compared to the EUR,
GBP, and CHF. Both EUR/USD and GBP/USD seem to be trading at premiums
compared to their short-term intrinsic worth.</p></li><li><p>Anticipation from Upcoming Data: The bank
anticipates that the impending US economic data releases for the week
could further enhance the attractiveness of the USD across the board.</p></li></ol><p>Summary:</p><p>Credit Agricole underscores the potential for a robust USD
performance in the backdrop of a renewed 'soft landing' narrative. While
such a scenario traditionally detracts from safe-haven assets like the
USD, the bank argues that the present conditions, characterized by
resilient US data and a peaking Fed cycle, could instead buoy the USD,
especially when factoring in its substantial rate appeal and market
positioning against European counterparts.</p><p>For bank trade ideas, <a href="https://plus.efxdata.com/ad/track/4655172E54F06040571CD0AB083845AD" rel="nofollow" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://plus.efxdata.com/ad/track/4655172E54F06040571CD0AB083845AD&amp;source=gmail&amp;ust=1691004569881000&amp;usg=AOvVaw1L9YxHhymFFxW6if6SuRWA">check out eFX Plus</a>. For a limited time, get a 7 day free trial, basic for $79 per month and premium at $109 per month. <a href="https://plus.efxdata.com/ad/track/4655172E54F06040571CD0AB083845AD" rel="nofollow" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://plus.efxdata.com/ad/track/4655172E54F06040571CD0AB083845AD&amp;source=gmail&amp;ust=1691004569881000&amp;usg=AOvVaw1L9YxHhymFFxW6if6SuRWA">Get it here</a>.

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This article was written by Adam Button at www.forexlive.com.