Analysts at MUFG Bank, expect the US Dollar to remain firm this week and see it with scope to rise. They point out the Federal Reserve “comunicates caution”.
Key Quotes:
“We expect the US dollar to remain firm this week with scope for modest gains with the US rates market vulnerable to some further removal of additional monetary easing this year. It remains our core view that one further cut will be forthcoming from the Fed but certainly the communication on Friday leaves this call a close one. There was less to be garnered from James Bullard (voted for 50bp cut last week) and Eric Rosengren (voted for no change) given their comments were consistent with how they voted.”
“There was more to garner though from Vice Chair Clarida’s comments. Clarida came across as quite optimistic and someone not in a rush to cut again. He described the US economy as the “star pupil” adding the US consumer was never in better shape. The divisions within the FOMC do highlight the risk of inaction for longer than we expect and hence further upward pressure on short-term yields. The Fed also appear determined to tackle the volatility in short-term money market rates. The New York Fed announced details on Friday of daily overnight repo operation each day this week and indeed daily through to 10 th October with some 14-day term ops as well.”
“A more stable short-term rates market may also help risk appetite this week and could serve as a catalyst for some short-term gains for USD/JPY this week.”
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