Research Team at BNP Paribas, suggests that while the risk environment has improved over the past few days, at least part of this stabilization reflects a reduction in Fed expectations as well as reduced expectations for CNY devaluation in light of the USD’s broad retreat. Key Quotes “Given this, we expect markets to be very slow to rebuild pricing for Fed rate hikes even if the risk environment continues to stabilize. We think the USD remains vulnerable vs. the EUR and JPY in the weeks and months ahead, and last week adjusted our forecasts to target EURUSD reaching 1.16 and USDJPY reaching 108 by the end of H2. We think the outlook is brighter for the USD vs. commodity exporter currencies, particularly with crude prices under pressure again in the aftermath of news that Saudi Arabia and Russia had agreed to cap but not cut production. Ahead today, we expect US industrial production to have expanded in January after four consecutive monthly contractions, but this is unlikely to reverse the impression that US manufacturing remains under considerable pressure. The minutes to the FOMC meeting are likely to reflect fairly high confidence among the Committee members as they initiated their rate hike cycle, but the information will probably be viewed as somewhat dated in light of subsequent deterioration in financial conditions.” For more information, read our latest forex news.