US: Reduced expectations for Trump-reflation this year - Westpac

According to Tim Riddell, Research Analyst at Westpac, a clearing of tensions with Russia may provide some geopolitical breathing space, but the pullbacks in USD and US yields reflect reduced expectations for Trump-reflation this year.

Key Quotes

“The fall in the Atlanta Fed’s GDP NowCast (0.63%) since mid-quarter (3.38% on 01 Feb) and the drop in U. Mich inflation expectations have also highlighted fading prospects for tax reforms and infrastructure investment in this year.”

“Into month end, focus should shift to US debt ceiling/govt shutdown risks as well as the Treasury’s currency report, which if hard-line, may pressure USD.”

“Fed comments have been more balanced into this week and have assisted the slide in US yields. Although global yields have pulled back, upside prospects for USD strength are limited until there are clearer signs over a government funding deal and trade protectionism.”