USD remains under a cloud - Westpac

Imre Speizer, Research Analyst at Westpac, explains that the multi-month decline in the USD has stalled, but it remains under a cloud.

Key Quotes

“Absent a shock, a 14 June Fed hike is a done deal. However, the USD has struggled to capitalise, partly due to US political distractions and partly due to the recent soft patch in economic data (which in turn has restrained market pricing for the Fed Funds rate beyond 2017).”

“3 months ahead: Trump’s growth policies face obstacles, notably the challenge Republicans have finding a consensus that satisfies House conservatives and centrist Senators. “Russiagate” raises the political obstacles yet further, both as an all-consuming distraction and by reducing the president’s political capital. Political risks surge yet further in September when a new government funding bill is due and the debt ceiling comes into play.”

“Our medium-term core view of a rising US dollar is based on normal service resuming (political risks dissipating) and US growth and therefore interest rates and the US dollar resuming the trend rise witnessed in 2016.”