USD is living on borrowed time - TDS

Analysts at TD Securities suggest that there are clear takeaways from the most recent Fed meeting that will have an appreciable impact on the broad USD.

Key Quotes

“Importantly, there are a few elements from this meeting that should lean against the USD as 2019 unfolds, providing support to our generally bearish outlook next year. Even though the Fed now sees "some further gradual hikes", the dot-plot has effectively shifted lower. This is a tacit acknowledgment that the Fed is closer to neutral and that its runway has shortened. With the longer-term dot sitting at 2.75% (from 3.00%), this implies less runaway support for the USD on a 'divergence' narrative.”

“Rate differentials are likely to play an important role over the next year especially as the global policy landscape moves away from unconventional measures. This now includes a slower moving Fed. We do not think the USD can escape this aspect of the market. Indeed, the USD's correlation structure with US relative equity performance has begun to revert decisively towards rate markets.”

“In the coming weeks however, we think a mix of FV and positioning should support a USD unwind as the realities of fading US exceptionalism begins to filter through into the G7. This means that the reserve currencies - EUR and JPY - should lead the charge, though the JPY looks likely to be a leader. Meanwhile, GBP will lag given that Brexit thing.”