USD: More legs to the yield fuelled rally - Westpac

Sandeep Kanihama FXStreet Contributor

US yields are up sharply since Trump’s win (+60bp) but historical analogues (taper tantrum & QE2) suggest they could rise at least +100bp over 6-12mths and in short, there’s more legs to the yield fuelled USD rally expects Richard Franulovich, Research Analyst at Westpac.

Key Quotes

“Another HIA style repatriation of foreign earnings, a more hawkish Fed as Trump fills 2 governor vacancies in 2017 as well as the chair and vice-chair in 2018, and a rolling run of 2017 European political risks (Dutch, German and French elections), should all sustain USD strength well into 2017.”

“But positioning suggests the USD is well owned, a Dec Fed hike is fully priced, our US surprise index suggests all the good news is priced in too and we are in a fiscal policy news vacuum likely until Trump’s 20 Jan inauguration. USD index could ease 1-2% before the next leg up.”

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.

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