Strategists at Citi Bank are advising investors to take advantage of buying opportunities in the US dollar following Donald Trump’s victory in the elections. The bank sees further potential for the greenback to strengthen, particularly against the euro and Scandinavian currencies, which have recently underperformed.
Here are the key points to consider:
### Market Outlook
– Citi strategists believe that the lack of ticket-splitting in the elections could lead to a “red wave” scenario with a Trump win.
– Foreign exchange markets are expected to focus on tariff-sensitive currencies as fiscal policy changes may take time to materialize.
– Confirmation of the House going to the Republicans may be needed before anticipating broader fiscal policy adjustments.
### Investment Strategy
– While cautioning against chasing the USD rally immediately, Citi’s strategy is to wait for a potential dip post-Fed meeting before buying into the currency.
– Downside potential is identified in currencies vulnerable to tariffs, such as CNH, TWD, and THB, which are considered as clear short positions.
– Among G10 currencies, EUR is a prime candidate for selling due to its trade surplus with the US, along with the Scandies (NOK and SEK) being higher beta EUR.
### Currency Analysis
– NOK may underperform on weaker oil prices under Trump, despite short-lived correlations with oil.
– SEK’s sensitivity to the global manufacturing cycle may lead to disruptions from ongoing trade and tariff wars.
### USD Appreciation
– A full “red sweep” in the elections could justify a 5% appreciation in the USD, with potential for a 3.4% downside in EUR before fully reflecting Trump’s policies.
– Citi will be monitoring trend lines to sell into, with tactical supports at specific levels, while not ruling out further downward movement based on their analysis.
In conclusion, Citi’s strategic outlook provides valuable insights for investors looking to navigate the current market conditions. By being cautious yet opportunistic in their approach to the USD and other currencies, investors can potentially capitalize on the evolving geopolitical landscape and its impact on the financial markets. Stay informed, stay proactive, and make informed decisions to secure your financial future.