Strategist at Westpac Richard Franulovich sees the greenback, tracked by the US Dollar Index, gathering further traction post-Brexit.
Key Quotes
“Reluctantly USD bullish here, Brexit imposing a structurally higher “political risk premium” on assets that will not go away soon and may well intensify, even if Article 50 is never triggered”.
“Stress points that will prevent risk premiums from ever falling too far include Italy’s senate reform referendum Oct 2016, US presidential elections Nov 2016, Dutch elections Mar 2017, French Apr-May 2017 and German Sep-Oct 2017 – each carry high risks of a “protest” vote”.
“USD likely firms into these events but we are reluctant USD bulls given that even ahead of Brexit the Fed had been gravitating toward an even more glacial path for rates. USD if anything vulnerable next week to a payrolls report”.
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