Markets

HSBC’s Bloom changes currencies call to a dollar bull run

Key Points
  • HSBC's global FX chief has changed his tune to a dollar bull run.
  • The analyst sees money pouring into 2-year two-year U.S. bonds.
  • The dollar is currently on pace for its best week since November 2016.
VIDEO3:1103:11
The greenback is back: One strategist explains why he's changed his view

The head of HSBC's FX research team has said he has completely altered his outlook to back a dollar bull run in the coming weeks.

"We have changed our view. We were very wishy-washy, the dollar's kind of going sideways. It worked well but we think we are now in breakout time," David Bloom told CNBC's "Squawk Box Europe" on Friday.

On Friday morning, the dollar hit a six-week high against sterling at $1.3886. The dollar index that measures the currency against a basket of peers has risen almost 3 percent in the last 30 days.

Conversely, the euro fell to 3 and a half month lows against the dollar after yesterday's European Central Bank (ECB) meeting. This after bank President Mario Draghi offered no clear evidence of an end date to the ECB's asset purchase program.

Bloom said that investing in the yield currently on offer for a two-year dollar denominated U.S. bond is a safe bet when data shows a slowdown is coming in other parts of the world. He said that this trade is pushing large amounts of capital into dollars.

The FX analyst added that inflation numbers are only picking up in the United States and the Fed is going to be the only large central bank to normalize rates.

"I've smelt the coffee," he said. "Maybe I'm four days too late, but at least I've got time to make some money. The point is, this is a dollar bull run for the moment."

HSBC's latest note predicts a 5 to 10 percent breakout to the upside in the value of the dollar against other currencies.

In its latest key FX calls, HSBC has predicted the euro versus dollar pair will fall out of its recent trading range and fall to 1.15 by the end of 2018. Against the Chinese renminbi, it now expects a 6.40 level by the end of the year.

Against the Japanese yen, HSBC now forecasts the dollar to fetch 110 by the end of the second quarter this year.