USD is not hot - ING

Analysts at ING suggest that they’re sticking by their claim that the USD is ‘not hot’ – despite the currency arguably getting some heat from the passing of a GOP Tax Bill this week.

Key Quotes

“There are a multitude of factors for our bearish dollar view - the ambiguous economic effects stemming from the Tax Bill, an unsettled US political backdrop ahead of the November midterm elections and the better goldilocks investment opportunities outside of the US.”

“Crucially – and unlike this time last year – markets have not fallen into the Trumpflation trap. One could playfully say that while Last Christmas (Wham!) investors gave their hearts to the dollar in anticipation of a reinvigorated US economy, gains were quickly given away the next day (or so). And it appears that this year, guarded investors will be looking to save themselves from tears by putting money to work somewhere more special.”

“The bottom line is that the USD is trading under New Rules (Dua Lipa). An environment of rising US yields no longer guarantees USD outperformance – not least because of the greater synchronicity across bond markets amid a broadening global recovery. Fatigue with the US economic story suggests that, at best, we expect to see a pretty quick rise and fall in the USD as a result of the GOP Tax Bill.”