USD uptrend remains intact - Westpac

The US dollar’s uptrend since early September remains intact and there are signs the US dollar has made a cycle low, according to Imre Speizer, Research Analyst at Westpac.

Key Quotes

“Financial conditions suggest upside potential for both economic data and the USD. The progress of Trump’s tax plans and the appointment of the Fed’s chair are likely to remain major market influencers. On the latter, Powell is the strong favourite, and is seen as less hawkish than next favourite Taylor.”

“Wednesday’s FOMC meeting is unlikely to provide much news given tapering has begun and the Fed’s dot plot projections have signalled a Dec rate hike (95% priced in).”

“3 months ahead: Beyond a near term stumble, the USD remains in good shape. Accommodative financial conditions point to yet more upside surprises in coming months while yield spreads should gravitate in the USD’s favour as the Fed Funds rate extends its glacial ascent above other countries’ key cash rates and as the Fed’s balance sheet shrinks relative to the ECB and the BoJ’s balance sheets.”