USD: Uptrend is in good shape - Westpac

According to Richard Franulovich, Research Analyst at Westpac, USD’s (still nascent) uptrend is in good shape as USD gains in the wake of an FOMC that lacked any overtly hawkish signals and went out of its way to stress the “symmetric” nature of the target suggests positioning is still struggling to keep pace with the velocity of the move.

Key Quotes

“Rising Fed expectations by and large continue to dominate pricing of longer term yields, rather than term premium, keeping in place the “USD healthy” dynamics around rising yields vis-à-vis what transpired through Jan/Feb when a rising term premium was the dominant driver of higher yields.”

“The USD won’t have it all its own way though: our Eurozone data surprise index appears to have crested at “washout” levels while our US index appears to have more downside near term. Beyond that, H2 USD outlook decidedly cloudy thanks to US mid-term election risk and a probable renewed focus on materially larger potential for ECB policy normalisation versus a Fed nearer to neutral.”