Risk sentiment improved this week, irrespective of weaker Chinese trade data keeping fears over the need of a further CNY depreciation intact. Considering this week’s FOMC meeting minute’s and Fed members’ more cautious rhetoric, a large part of this week’s improvement can be attributed to decreased Fed Rate Expectations. This explains too why the greenback failed to appreciate this week.

Looking ahead, we believe that global growth uncertainty is likely to keep cross market volatilities high. This, however, does not exclude further improving sentiment, especially considering that the focus will increasingly shift to the G20 meeting at the end of February.

Although it cannot be excluded that the USD faces more Downside Risk in the shortterm. We believe dips should be bought. This is especially true as further falling Fed Rate expectations would imply policy easing. This appears unlikely unless incoming data weakens considerably.