USD: Mood has soured - Westpac

The analysis team at Westpac points out that the past month has been full of headlines, particularly on US politics and towards the US dollar, slowly but surely the mood has soured.

Key Quotes

“A more positive mood in Europe, following the election of President Macron in France, has aided this trend.”

“The US dollar index (DXY) has slowly trended lower as the impact of delays on the health care bill and an absence of progress on tax and infrastructure reform was felt. The disappointing Q1 GDP outcome also weighed, with a low of 98.6 seen in early May. Since that time, and despite the political uncertainty that has ensued following President Trump’s sacking of FBI Director Comey, the US dollar has regained some ground, with it currently at 98.85.”

“From here, we anticipate a return to the US dollar uptrend that, for the most part, has been with us since April 2016. A rate hike from the FOMC at their June meeting combined with positive commentary on the outlook as well as continued strength in the labour market and sentiment should be enough to see DXY near 102 by end-2017 (+4.5%) and at 106 by end-2018 (+7.7% cumulative). Note, underlying this view is an expectation that the FOMC will follow up a June hike with another in December and two further moves in 2018 (March and September).”