USD Remains Under Pressure – Westpac
In opinion of strategists at Westpac, the greenback’s perspective has somewhat deteriorated following May Payrolls.
“Softer US retail sales could weigh on the USD while the FOMC is likely at best neutral if not negative for the USD too”.
“The key US core control retail sales group is due a correction after last month's unsustainably strong 0.9% gain. Soft payrolls add an extra layer of caution over the health of the consumer”.
“The FOMC could downgrade their assessment of the labour market given May's poor showing. The Fed is unlikely to signal a balanced risks assessment either. With that the results of the UK referendum still unknown and pending June payrolls it would make little sense for the Fed to signal that their next meeting (27 July) is live”.
“But, with a majority of 9 among 17 members calling for 2 hikes in 2016 it seems unlikely the median will shift in the 2016 dots. This group would need to move almost en masse to force that median down to 1 hike. The distribution of dots around that median should take on a dovish bias though, certainly the 7 calling for 3 to 4 hikes this year could see some trimming, if only because there is one less meeting this year”.
“The long term neutral rate (3.25%) probably comes down another 25bp, as it has done so at virtually every dot plot refresh in recent years. All told hardly a USD bullish backdrop”.