HALISTER1: USD’s Reflation Trade ‘Taking a Nap�™; EUR/JPY Seen Rising: ING

USD’s Reflation Trade ‘Taking a Nap’; EUR/JPY Seen Rising: ING

(Bloomberg) -- The USD’s reflation trade on President Trump’s economic policies is “taking a nap,” but may return in 2H, says Wei-Tong Shu, ING’s head of FX, rates and credit trading in the Americas.
  • Markets are underpricing likelihood of two Fed interest-rate increases this year and two-three hikes in 2018, which would bolster the USD, Shu said in interview Tuesday from New York
  • “The cross I like most is euro-yen” in FX
  • European economic outlook is improving; inflation is accelerating in Germany vs Japan
  • EUR/JPY may rise to 126 or higher in short term, from ~124.36 Tuesday
  • UST 10Y yield should climb to 2.6% in one-three months

Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Wei-Tong Shu (ING Groep NV)

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