Forex Flash: All market themes point to US Dollar strength - Societe Generale

According to Sebastien Galy, the FX markets are now under the influence of a three themes: "the American economic revival, diverging monetary policy expectations and the (unfinished) euro area (EA) crisis."

Sebastien notes: "Those themes all point in the same direction: a stronger dollar. Dollar strength is now far less dependent on risk conditions; the US economic outperformance and the fears of a not-too-distant Fed exit imply that the dollar is no longer a funding currency of choice in the carry trade. The exit debate will heat up in H2."

"For now, we fear that another EA shockwave will hit the euro, as dysfunctional politics and procrastination over reform resurface.
The UK Minutes and BoE Minutes will keep cable heavy too, this week and beyond. The yen sell-off may slow as risk conditions become murkier, but the early-April BoJ meeting still supports a higher USD/JPY" he adds.