23 Mar 2015
US frustration with USD strength – DB
FXStreet (Barcelona) - Taisuke Tanaka, Strategist at Deutsche Bank, comments that USD strength is poised to continue its uptrend through 2016-2017, but any short-term reversal might be anticipated in USD/JPY, driven by political rhetoric in the US.
Key Quotes
“The main factors driving the current USD strength are the robust US economy and the outlook for an impending rate hike.”
“Judging strictly from the difference in Japanese and US monetary policy, the USD/JPY uptrend looks poised to continue for another year or two. This view is consistent with the historical pattern of a strong dollar cycle starting in a US election year and holding through the first year of office.”
“Federal Reserve Chair Janet Yellen indirectly touched upon the strong dollar when commenting on the slowdown in US exports and inflation. We suspect the reason she did not directly address the USD strength was because the macro environment is decidedly bullish on the USD (a view that is unlikely to change in the foreseeable future), and she did not want to stir unnecessary speculation in the markets.”
“We assume the USD will remain on its current trajectory through 2016-2017, when we see it hitting a cyclical peak.”
“Along the way, however, we expect it to exert pressure on the US economy, corporate earnings, share prices, and government policies.”
“If so, we would welcome any short-term reversal in the trend (dollar weakening versus yen strengthening) driven by political rhetoric as an opportunity to accumulate on weakness.”
Key Quotes
“The main factors driving the current USD strength are the robust US economy and the outlook for an impending rate hike.”
“Judging strictly from the difference in Japanese and US monetary policy, the USD/JPY uptrend looks poised to continue for another year or two. This view is consistent with the historical pattern of a strong dollar cycle starting in a US election year and holding through the first year of office.”
“Federal Reserve Chair Janet Yellen indirectly touched upon the strong dollar when commenting on the slowdown in US exports and inflation. We suspect the reason she did not directly address the USD strength was because the macro environment is decidedly bullish on the USD (a view that is unlikely to change in the foreseeable future), and she did not want to stir unnecessary speculation in the markets.”
“We assume the USD will remain on its current trajectory through 2016-2017, when we see it hitting a cyclical peak.”
“Along the way, however, we expect it to exert pressure on the US economy, corporate earnings, share prices, and government policies.”
“If so, we would welcome any short-term reversal in the trend (dollar weakening versus yen strengthening) driven by political rhetoric as an opportunity to accumulate on weakness.”