USD: Cautious stance - Westpac

In view of Richard Franulovich, Research Analyst at Westpac, data/events validate a cautious USD stance: hourly earnings remain muted, the NFIB survey and JOLTS job ads are cresting, more Fed speakers seem less committed to a hike before year’s end (Harker & Brainard), while Yellen is increasingly hedging on the “transitory inflation slowdown” thesis, noting that certain price reductions “partly” explain low inflation, a change from “significantly explain”.

Key Quotes

“The Russian election meddling controversy continues to escalate in ways that threaten Trump’s pro-growth agenda too.”

“For the time being would express USD shorts mainly via JPY – EUR increasingly trading as though the market is very long and the ECB is unlikely to yield anything meaningful on tapering when they meet July 20. Would not get excited by upside USD potential beyond 97 though: with the BoC, ECB and BoE all tacking in a less dovish direction policy differentials are set to move against the USD.”