USD: a major rally appears unlikely – TDS

In opinion of FX Strategists at TD Securities, sustainable rallies in the greenback remain unlikely for the time being.

Key Quotes

“Despite some soft data recently, US GDP remains on track for above-trend 2.2% growth for 2017. Fiscal uncertainty continues with the near-term risk of a government shutdown and unclear prospects for tax reform later this year. But full employment and gradually rising inflation should allow the Fed to hike i n June and September regardless. The risk i s for balance sheet reduction to start late this year; mid-2018 is our base case”.

“While pockets of USD strength will appear, the case for another major rally has waned. Continued Fed tightening will remain supportive, but focus is shifting to prospects of central bank normalization elsewhere. Other currencies are likely to benefit disproportionately from global growth and inflation tailwinds, but this may remain a theme for H2 a s we look for range trading to prevail against the major G10 pairs”.