USD: Sharp bounce likely stalls into recent highs - Westpac

Richard Franulovich, Research Analyst at Westpac, suggests that the USD likely forms a short term peak week’s end if payrolls soften, certainly that’s where the risks seem to lie in the wake of 2 outsized consecutive gains averaging +274k.

Key Quotes

“Aug payrolls have surprised on the downside in each of the last 5 years and in 14 of the last 18 years too. This sharp USD bounce likely stalls into recent highs in the 97.0-97.5 range.

Would not get too carried away with downside USD though – the ECB looks set to deliver a small nod in the direction of easier policy 8 Sep. Brexit inspired staff downward revisions to GDP/CPI, notably weaker surveys and CPI in August should galvanise the Council into action. Tweaks to the QE parameters such as a 6mth formal extension of QE beyond March 2017 the safe/consensus option.”