USD: Guided by US-China deal developments – Westpac

Richard Franulovich, Head of FX Strategy at Westpac, suggests that the hopes for a US-China deal at the G20 at the end of this month, potentially along the lines of the US-Europe détente several months ago, could be a near term challenge to the USD.

Key Quotes

“Yield spreads continue their relentless march in the USD’s favour and there are still no clear signs that the fiscal-fueled US growth story is losing legs.”

“Admittedly the strong showing by Democrats in the midterms eliminates some 2019 upside USD potential that would have been delivered by potentially more fiscal stimulus, but for now, all signs point to continued above trend growth.”

“The Atlanta Fed nowcast for Q4 is at 2.9%, a solid showing after 3.5% in Q3 and 4.2% in Q2. By contrast the Eurozone growth picture still looks challenged and Italy risks continue to rumble along.”

“Last week’s USD index buy zone at into 95.0 lifted to 96.0.”