USD: Near term risks favour an extension of recent gains - Westpac

According to Richard Franulovich, Research Analyst at Westpac, near term risks favour an extension of recent USD index gains.

Key Quotes

“Incremental news continues to verify the baseline scenario for a Trump stimulus package that ultimately underwhelms in size, scope and timing. Tax reform and infrastructure will likely run afoul of the same challenging political realities that torpedoed the repeal and replacement of ACA - the Republican party remains heavily divided on infrastructure, border adjusted taxation and revenue neutrality vs debt/deficit-funded tax cuts.”

“That said, near term risks favour an extension of recent USD index gains. Already released March regional PMIs and the blowout Conference Board consumer confidence report strongly hint at upside risks for ISM and payrolls next week. Market pricing for a 48% chance June Fed hike looking very undone, especially in light of upside risks to next week’s data.”

“The USD’s window for strength is brief though, with markets likely to then switch their focus to debt ceiling/govt shutdown risks in mid-to-late April.”