USD index relinquishing overvaluation – Westpac

Richard Franulovich, Research Analyst at Westpac, explains that near term USD index risks skewed toward a test of the lower end of its Election Day range (95.88-98.70) as regional Richmond/Empire surveys flag an ISM next week toward 50.

Key Quotes

“Absent a shock a 14 June Fed hike is a done deal but the USD has struggled to capitalise, yield spreads if anything are moving against the USD as Eurozone growth has firmed and ECB officials signalled a nod to normalisation may be seen at their Jun and Sep meetings.”

“Trump’s growth policies face obstacles, notably the challenge Republicans have finding a consensus that satisfies House conservatives and centrist Senators. “Russiagate” raises the political obstacles yet further, both as an all-consuming distraction and by reducing the president’s political capital. Political risks surge yet further in September when a new government funding bill is due and the debt ceiling comes into play.”