Forex Flash: USD risks appear neutral in short-term – Westpac

FXstreet.com (Barcelona) - According to Global Strategist Sean Callow at Westpac, “While we still struggle to build a compelling multi-week case for sustained USD upside amid suppressed global volatility and abundant liquidity conditions, short-term USD risks appear more neutral. Draghi’s comments that the EUR’s rise may also alter the ECB’s risk assessment on price stability and that the Bank is sensitive to the money market impact of LTRO repayments suggests another ECB easing cannot be ruled out.”

The 24/25 February Italian election and the risks of a more fractured government should also induce some caution. Additionally, “The USD may draw some strength from the FOMC minutes as well – they are likely to repeat that a few members favor slowing or stopping asset purchases by mid-2013 (we suspect asset purchases will ultimately continue well into 2013H2 as the jobs market fails to deliver but that won’t be clear for some months yet).” Callow adds.

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