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19 Mar 2015
USD outlook remains positive in 3-m view – Westpac
FXStreet (Edinburgh) - In the view of Richard Franulovich, strategist at Westpac, the perspective for the greenback remains on the bullish side in a 3-month horizon.
Key Quotes
“Some further potentially substantial multi day USD weakness looks like the order of the day with the FOMC having undercut the USD on both yield and growth grounds”.
“As widely expected the FOMC shed the “patient” language when describing their approach to beginning the process of normalisation but the net takeaway for the USD is negative, the Fed downgrading both activity and their dot plot Fed Fund projections, the latter quite substantially”.
“The Fed has also drawn some attention to the USD as a headwind for the economy, albeit implicitly, noting that, “export growth has weakened”.
“But it’s the Fed Fund dot plot projections that have arguably inflicted the most damage on the USD, the interest rate dots marked down sharply, implying a more shallow policy tightening trajectory and probably (though not definitively), a later lift off too”.
“That DXY has backed away from such an obvious “big round number” (100), adds to the sense that a major multi day high has been achieved. We see risks for the USD to ease back to 95.5 and adopt a negative week and month ahead bias, though we stick with a bullish 3 month outlook for the USD, in deference to the USD’s superior medium growth and yield backing, vs the likes of the Eurozone, Japan and China”.
Key Quotes
“Some further potentially substantial multi day USD weakness looks like the order of the day with the FOMC having undercut the USD on both yield and growth grounds”.
“As widely expected the FOMC shed the “patient” language when describing their approach to beginning the process of normalisation but the net takeaway for the USD is negative, the Fed downgrading both activity and their dot plot Fed Fund projections, the latter quite substantially”.
“The Fed has also drawn some attention to the USD as a headwind for the economy, albeit implicitly, noting that, “export growth has weakened”.
“But it’s the Fed Fund dot plot projections that have arguably inflicted the most damage on the USD, the interest rate dots marked down sharply, implying a more shallow policy tightening trajectory and probably (though not definitively), a later lift off too”.
“That DXY has backed away from such an obvious “big round number” (100), adds to the sense that a major multi day high has been achieved. We see risks for the USD to ease back to 95.5 and adopt a negative week and month ahead bias, though we stick with a bullish 3 month outlook for the USD, in deference to the USD’s superior medium growth and yield backing, vs the likes of the Eurozone, Japan and China”.