Easing trade tensions may bring back interest in dollar carry trade — Barclays

According to Barclays analysts, carry trade deals may see a resurgence in the short term. Experts say the tension between the US and China is easing, which means less pressure on central banks to cut interest rates.

The organization favors the dollar and a number of other currencies, opting for euro-paired transactions as the refusal to raise tariffs weakens downside risks for the dollar.

Barclays strategists say that global central banks are in no hurry to ease monetary policy and remain dependent on incoming economic data while the global environment is becoming more positive. The bank's experts say the markets broadly expect that the global GDP growth rate is likely to slow down but not cease. This allows financial regulators to avoid hastily reducing rates.

Barclays predicts that volatility in the currency markets will fall to levels seen after the US elections in November and before the announcement of tariffs in early April. At the same time, analysts warn that the window for carry trades will be time-limited as interest rates worldwide are approaching their neutral levels.