USD: Risk of a run at 95 levels – Westpac

The USD was enjoying a grind higher supported by a hawkish Yellen but the pace and scale of the move was very underwhelming and Richard Franulovich, Research Analyst at Westpac suggests that USD index now risks a run at 95 on a one month horizon.

Key Quotes

“Not a lot going for the USD right here as a growing coterie of central banks (the ECB, BoC and the BoE this week) signal a clear intent to join the policy normalisation bandwagon. Against that the Fed’s plans into year’s end are well discounted – another +25bp hike this year and slowing down reinvestments – and if anything the risks are building for less policy normalisation if inflation remains benign.”

“Republican Party struggles over health care reform a foretaste of likely similar struggles on tax cuts, tax reforms or infrastructure. There is a larger disappointment trade for US assets when the realisation dawns that Trump’s reflation policy will be heavily watered down and delayed, but that is a story for late 2017.”