USD outlook stays positive – Westpac

In opinion of Richard Franulovich, Chief Currency Strategist at Westpac, the outlook for the greenback still remains positive.

Key Quotes

“The USD index has been weaker than yield spreads - and indeed other Trump reflation indicators such as inflation breakevens and equities - would warrant in recent weeks (see slide over). One might put that down to the emergence of a “risk premium” reflecting the occasional attempts by Trump Administration officials to talk down the USD”.

“But the underlying outlook remains positive. Markets are impatient with the

Trump administration's heavy focus on isolationist themes but according to congressional leaders, Trump’s progrowth agenda including border adjusted taxation, another tax repatriation holiday and infrastructure are all set to be addressed beginning April. Rates markets continue to price in fewer hikes (+52bp by Dec 2017) than the Fed’s median (+75bp)”.