USD Weakness Appears Temporary – Westpac
Richard Franulovich, Strategist at Westpac, expects pullbacks in the greenback to remain shallow.
Key Quotes
“Still
a challenging backdrop, a range of data suggesting Q1 growth will be
sub-par while weak March import prices, PPI and CPI all suggest the
recent jump in inflation may indeed prove transitory, much as Chair Yellen has said lately”.
“Safe to assume next week’s Fed meeting will build on the aforementioned, the guidance likely to signal a lack of urgency once again”.
“Even
though energy prices have firmed and risks around China and global
growth seem to have dissipated the Fed is more likely than not to
repeat, “global economic and financial developments continue to pose
risks”.
“The Fed is likely to shy away from characterising where
the risks lie for another meeting too. All told hard to see a hawkish
surprise though the Fed is nevertheless likely to keep the door open to
hikes”.
“A potentially softer Q1 GDP should add to the USD’s offered tone. USD
weakness though shouldn’t extend more than a few weeks and no more than
an additional 2-3% beyond current levels – a strong run of US data in
Q2 has been a reliable feature of the macro landscape in recent years, a
rebound eff ect from the residual seasonality that has tended to
depress Q1”.