Imre Speizer, Research Analyst at Westpac, explains that after a strong run during the past month, the US dollar has taken a breath and the 15 Mar FOMC decision is the key US event this week (datawise we have CPI, retail sales and the early March PMIs, which should be overshadowed).
“A 25bp Fed hike is assured, with markets pricing a 100% chance of such. More interesting will be the dot-plot projections of the Fed rate. The median projection of 3 hikes in ‘17 is unlikely to change, since a majority 4 of 6 members at the median would need to turn more hawkish. That said, the distribution is likely to shift in an upward direction (at the Dec meeting, 6 saw fewer than 3 hikes in 2017, while 5 saw more) given the recent upbeat Fedspeak. In her commentary, Yellen is likely to stress gradualism and “moderate” growth.”
“USD yield support has come a long way but it’s still not spent: markets have mostly just front-loaded hikes, +70bp priced by end-2017, which is still shy of the 3 hike median. The Fed’s tone and a material shift in the dot plots will have a large bearing on which way the USD reacts on Wed. We see the risks as skewed to the upside.”
“3 months: We suspect the USD will falter in summer when it becomes clear that meaningful tax reform will run afoul of challenging political realities: even if Senate filibuster risks can be avoided by using the 2018 reconciliation bill (where only a simple majority is needed) great swathes of the Republican party remain lukewarm on infrastructure, border adjusted taxation and funding spending plans by gutting government agencies.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.