US Dollar Index to stay on a firm foot as Fedspeak underscore a move forward with QE tapering – Westpac

Fed officials do not appear swayed from their QE tapering plans by the slowdown in jobs growth, keeping the US dollar on a solid footing. The US Dollar Index (DXY) is looking a little shaky into 94.5, but should retain the bulk of its recent gains, according to economists at Westpac.

Gas supply bottlenecks in Europe and power shortages in China to cast doubt on rebound prospects in the rest of the world

“US Q3 GDP projections continue to slip, the latest median estimate falling to 4.7% annualised. But it hasn’t dented the USD and further material growth downgrades seem unlikely in any case.”

“Power shortages in China and gas constraints in Europe likely extend well into the northern hemisphere winter, casting an ongoing cloud over global rebound prospects well into 2022.”

“Fed officials continue to signal a strong preference for moving ahead with a relatively brisk 6 to 9 month tapering of asset purchases, likely announced at their next meeting 4th November and starting before the year is out.”

“DXY looking a little shaky into 94.50 but should retain the bulk of its recent gains amid further signs the global rebound is losing steam and Fed QE tapering.”