USD should remain resilient – Westpac

Sandeep Kanihama FXStreet Contributor

According to Richard Franulovich, head of FX strategy at Westpac, the Fed’s decision to rebuild their balance sheet shouldn’t upset the USD much as shortdated bill purchases - to facilitate implementation of existing monetary policy - is a very different beast from large scale ECB/BoJ QE aimed at boosting credit, cutting risk premiums and lifting growth.

Key Quotes

“US-China trade talks unlikely to yield much, visa bans and blacklistings raising the hurdle for even a modest interim mini-deal. Trade and supply chain uncertainty likely extends deep into 2020. That will sap US and global growth yet further and compel more Fed cuts. Powell did not push back on expectations for an Oct rate cut and if anything stressed prospective downward revisions to employment trends.”

“But USD should remain resilient and DXY support at 98-98.5 likely holds. Rates markets already fully price a 31 Oct Fed cut and the global economy is not faring any better. A more protracted easing cycle will weigh on the USD but past cycles suggests there are long lags at play and it won’t be a negative story for the USD until well into 2020.”

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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