USD is showing more backbone - Westpac

The US dollar is showing more backbone, helped by stronger than expected data e.g. payrolls, small biz sentiment and record job openings in the JOLTS survey, explains Imre Speizer, Research Analyst at Westpac. Against that, Friday’s disappointing CPI inflation reading will ensure question marks over Fed policy will remain, he further adds.

Key Quotes

“Encouragingly, our surprise index warned that the bulk of the run of weaker data is in the rear view mirror, and the index is now at a neutral level. But it’s questionable whether fewer data disappointments will trigger a meaningful reversal in the dollar.”

“This week’s data calendar is busier and includes retail sales, housing starts, Philly, NAHB, Michigan and Empire surveys and FOMC minutes.”

“3 months ahead: Q4 offers a more forgiving environment for the USD than Q3. Washington is rushing into another debt ceiling and government shutdown showdown in Sep/Oct. But by Q4, these event risks will have been negotiated, seasonals are more supportive, and Trump reflation will enjoy a fresh burst of energy as Washington pivots towards tax cuts.”