USD risks a test of 94-95 – Westpac

Strategist at Westpac Richard Franulovich believes the greenback could slip towards the 94-95 region.

Key Quotes

“Reassuring US data (ISM and payrolls) boosting risk appetite more so than Fed hike expectations and as such the USD is going largely unrewarded”.

“Suspect that will not change until the Fed starts to lean more hawkishly. Earliest opportunity for a more forceful message will be the July 27 FOMC. Officials will be relieved Brexit has not left any lasting damage on US financial conditions and they will be reassured by the strong June payrolls too, setting the stage for a slight hawkish tweak to the Fed’s messaging”.

“That is not a done deal though – certainly there’s no urgency – leaving August 26 as the next most likely date for a potential hawkish tilt, when Chair Yellen speaks at Jackson Hole”.

“Until then USD index risks are skewed the other way and a pullback to 94-95 as likely yet more probably decent data (June retail sales, the first of the July PMIs, consumer confidence) does more for risk appetite than Fed hike expectations”.