USD undervaluation easing - Westpac
|USD still on the front foot though it’s mostly on external catalysts of late rather than any fresh intrinsic USD positives (e.g. increased Italian sovereign risk, persistently weak Eurozone data), explains Richard Franulovich, Research Analyst at Westpac.
Key Quotes
“US data has been uneven of late, average hourly earnings and core CPI on the subtrend side but retail sales, JOLTS and the early May regional PMIs strong. Main quibble with the USD here is that key factors that fueled the initial up leg – material undervaluation and lopsided short positioning - have both been trimmed back. An FOMC that stresses the “symmetric” nature of their inflation objective diminishes the chances of a hawkish Fed too.”
“Against that, the absolute level of yield support remains far too enticing (DXY weighted 2 and 10yr spreads hit fresh 18yr highs this week) and it has still not yet achieved bare minimum retracements of the bigger 15 month decline.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.