Markets have all but priced out any hopes of US fiscal stimulus coming through in 2017 and the narrative – if anything – seems to be that this is more of a 2018 story which is pressurizing the USD against its counterparts.
Key Quotes
“But what’s concerning to us is the negative term premium on the US 10Y yield and somewhat lower 5Y5Y inflation breakeven – both of which suggest that we have firmly returned to the status quo ‘lowflation’ world that we had been well accustomed to prior to last year’s US presidential elections. For sure, the White House will want to shift attention to its tax reform agenda following the failure to repeal and replace Obamacare; today sees the House Budget Committee voting on its FY18 budget proposal – which could mark the start of the GOP’s tax policy overhaul. While the process will undoubtedly be long and arduous, small steps towards what some may see as a ‘dead in the water’ tax reform bill could draw a line under the recent USD-selling theme in markets. DXY support around 94.00.”
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