US data remains impressive on a broad front, including solid above trend 3.5% Q3 GDP, 18-year highs in the Conference Board’s consumer confidence and a notable firming in the employment cost index, led by private sector wages and salaries hitting post-crisis 3.1% highs, according to Richard Franulovich, Head of FX Strategy at Westpac.
Key Quotes
“The fiscal-fueled US outperformance narrative has not run its course. The $300bn in federal spending increases agreed in the March 2018 Omnibus bill are spread over two years (i.e. including 2019) and it would be very surprising if tax cut stimulus suddenly waned barely 12 months after introduction. Fed hike pricing more likely to converge toward Fed dot plot guidance going forward, underwriting more medium term USD upside.”
“Near term USD clouded by US midterms, where a base case for Democrat gains in the House could taint Trump’s pro-growth agenda, though that is increasingly priced in, leaving a stronger Republican showing the underpriced tail risk.”
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