USD: Negative view persists - Westpac

Negative USD view persists amid the Trump administration’s more aggressive protectionist policy agenda and a probable lack of overtly hawkish Fed signals, explains Richard Franulovich, Research Analyst at Westpac.

Key Quotes

“FOMC to hike +25bp next week and retain an optimistic outlook but risks of a strong hawkish signal have eased following benign Feb earnings and CPI, weaker Q1 tracking estimates (Atlanta Fed nowcast trimmed to 1.9% from 2.5%) and evolving tariff/trade war risks.”

“FOMC dots should trend higher; six were below the median 3 hikes for 2018 as of Dec 2017 and surely easy financial conditions and fiscal risks see some of these move higher. But we need to see at least five of the six at the 2018 median add a fourth hike to lift the median – less likely.”

“Aggressive protectionist stance from the Admin unlikely to ease anytime soon and if anything could escalate into Nov midterms, risks heightened by the departure of more moderate voices.”