USD: Downside seems limited in 2019 - Westpac

Sandeep Kanihama FXStreet Contributor

Analysts at Westpac note that the US dollar (DXY) is only marginally below its 2018 high of 97.4 at 97.1 (–0.3%) and heading into 2019 underlying momentum in the US economy is unquestionably strong.

Key Quotes

“We look for US’ economic momentum to persist through 2019, and consequently anticipate US data will justify two further hikes by the FOMC in June and September. That will take the federal funds rate to the middle of the Committee’s defined ‘neutral’ band, and DXY to a peak of 98.6 at September 2019. As per market pricing however, risks to this interest rate view are skewed to the downside given global cross–currents; the potential for US fiscal concerns to flair again; and the FOMC’s current cautious approach to policy.”

“That said, with near–term risks for other nations more pressing than for the US, downside to the US dollar profile to end–2019 seems limited. Come 2020 however, a clear downtrend in DXY to near 92 is forecast, as global risks subside; the FOMC is confirmed on hold at 2.875%; and interest rate hikes come back on to the agenda in Europe.”

Author

Sandeep Kanihama

FXStreet Contributor

Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.

EUR/USD looks well bid above 1.1600

EUR/USD extends its recovery and climbs back above the 1.1600 mark in quite an auspicious start to the week. Improved risk appetite following the US-Iran agreement to reopen the Strait of Hormuz continues to weigh on the US Dollar, lending support to the risk complex. Looking ahead, investors are likely to remain on the sidelines ahead of Wednesday's FOMC meeting.

GBP/USD climbs to multi-day highs around 1.3460

GBP/USD remains comfortably in positive territory north of 1.3400 the figure on Monday. Cable continues to draw support from an improvement in market sentiment after reports that the US and Iran have reached a framework agreement aimed at ending the conflict and reopening the Strait of Hormuz.

Gold extends the recovery, targets $4,400

Gold rallies on Monday and climbs well above the $4,300 mark per troy ounce. The precious metal benefits from renewed selling pressure on the Greenback as investors reassess the implications of the US-Iran agreement to end hostilities and reopen the Strait of Hormuz. Market participants now turn their attention to Wednesday's FOMC gathering.