USD can see more topside - Westpac

The USD can see more topside into next week's Fed, a hike priced in but a strong “full steam ahead” message given still easy financial conditions, near certain tax cuts and constructive inflation signals in the latest CPI/PCE can still entice USD buyers, according to Richard Franulovich, Research Analyst at Westpac.

Key Quotes

“That backdrop likely sees a hawkish migration to the dots around an unchanged median (+75bp ‘18 & +50bp ‘19) and could see GDP revised up a smidge too (2.1% ‘18 & 2.0% ‘19).”

“Tax cuts still a point of caution. Senators Collins and Flake received assurances Congress will tackle Obamacare & immigration in exchange for their vote but conservative House GOP are strongly opposed. House Republicans from high tax states are renewing a push to stop repeal of state tax deductions too, a major revenue item the Senate will not yield to. Beyond that, struggling to see fresh USD positives: tax cuts are priced in and yield/data support has firmed yet the DXY is stuck at the bottom of a 3yr range.”