USD: Financial conditions suggest upside potential - Westpac

According to Tim Riddell, Research Analyst at Westpac, US financial conditions suggest upside potential for data and USD as Q3 GDP and PCE releases into next week’s FOMC meeting would normally dominate attention, but life and markets are different under Trump. 

Key Quotes

“The budget appears likely to be passed this week, but the progress of Trump’s tax plans and the appointment of the Fed’s chair are more likely to impact markets. Financial media seem to favour Taylor (hawkish) as the next Fed chair, but Predictit pricing backs Powell (he and Yellen are seen as less hawkish of the four real contenders) with Yellen rebounding firmly.”

“Next week’s FOMC meeting is unlikely to provide much news given that tapering has begun and the dot plot signalling of a Dec rate hike (almost 90% priced in).”

“Although data and the ECB signalling maintenance of accommodative policy as they begin their APP tapering, should favour USD, the stance of the next Fed chair may be the key USD mover.”