(18 JULY 2017)DAILY MARKET BRIEF 2:US: downside risks on import prices

The greenback is getting weaker against major G10 currencies and the euro dollar is now back above 1.15 for the first time since May 2016. The bullish trend seems very deep to us and there are two main points to address.

First of all, The Fed is back on hold regarding the normalization of the monetary policy. Anyway, higher interest rates would likely trigger a recession due to the level of indebtness of the North-American country.

Second of all, we have always considered that the true state of the US economy was overestimated and this appear to be the case. Fundamentals are mixed. Today will be released import prices for June and markets expect a decline of -0.2%. In May imports price already declined by 0.3% m/m. Excluding Oil, import prices have stood still.

There is then no fundamental for the greenback to strengthen in the medium rum. The US CPI recoded four successive declining monthly print. The Fed target seems less and less attainable in a reasonable timeframe. As a result, we firmly believe that reloading bullish positions on the dollar is a good bet within the next few months.

By Yann Quelenn