12 Jul 2013
Flash: USD shifts to neutral outlook in week ahead – Westpac
FXstreet.com (New York) - Near-term tapering expectations were heavily deflated by Bernanke’s comments that the, unemployment rate overstates the health of the jobs market, and that it’s too early to say if the economy has weathered fiscal restraint, notes Sean Callow, a Global FX Strategist at Westpac.
According to Callow, “Bernanke is sure to echo these more cautious comments at next week’s semi annual testimony and as such the USD could see further multi-day losses. However, there’s still no escaping the conclusion that at the margin Fed policy is still more likely to become less accommodative vs. the ECB.”
The USD’s medium-term trend has not been fundamentally upset given a slowing in EM growth momentum is still playing out (note Q2 China GDP due next week) and political risks in the Eurozone are on the rise again (i.e. the Greek and Portuguese governments still look flaky and there are renewed doubts in Spain following fresh press reports that PM Rajoy may indeed have received illegal payments). “We stick with a positive bias for the USD on a 1 and 3-month horizon but shift to neutral for the week ahead.” Callow warns.
According to Callow, “Bernanke is sure to echo these more cautious comments at next week’s semi annual testimony and as such the USD could see further multi-day losses. However, there’s still no escaping the conclusion that at the margin Fed policy is still more likely to become less accommodative vs. the ECB.”
The USD’s medium-term trend has not been fundamentally upset given a slowing in EM growth momentum is still playing out (note Q2 China GDP due next week) and political risks in the Eurozone are on the rise again (i.e. the Greek and Portuguese governments still look flaky and there are renewed doubts in Spain following fresh press reports that PM Rajoy may indeed have received illegal payments). “We stick with a positive bias for the USD on a 1 and 3-month horizon but shift to neutral for the week ahead.” Callow warns.