Corporate earnings could create some ripples in the currency markets, these strategists say.
Sure, last Friday's nonfarm payroll report is having its effect on the dollar - and more. But if you really want to watch for a ripple effect, just wait until first-quarter earnings reports start, according to Yuki Sakasai and Aroop Chatterjee, currency strategists at Barclays Capital.
BarCap's earnings forecasts are somewhat lower than the consensus, the strategists say. And while they are guardedly optimistic about the U.S. economy, "the market is likely to scrutinize incoming economic and earnings data for any sign of slowdown in the US economy," they wrote in a note to clients - and that could create short term trading opportunities.
If negative earnings surprises do start to pile up, "our view is that basically this may weigh on some risky currencies, at least in the short term," Chatterjee told me, pointing to the Australian dollarand others. He also downside surprises could temporarily hurt the dollar against other funding currencies like the Swiss franc and the yen.
But in the medium term, Chatterjee says, "our view is that U.S. outperformance will remain in place." So for that time horizon, he likes the Mexican peso against the Swiss franc.
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