Richard Franulovich, Head of FX Strategy at Westpac, suggests that the US growth expectations are suddenly cooling as the tumult in equities, a sharp widening in credit spreads and pockets of weaker data including housing, business surveys, retail sales and durable goods orders, all taking their toll.
Key Quotes
“Fed commentary has taken on a more cautious tone too; Vice Chair Clarida citing global risks, non-voter Harker questioning the merits of a Dec hike. The Atlanta Fed’s Q4 nowcast has eased to 2.5% from 2.9% last week while rates markets have pared 2019 Fed hike expectations from a touch over two hikes to a touch over one hike.”
“Hopes for a US-China deal at the G20 end of this month, potentially along the lines of the US-Europe détente several months ago, could be an added near term challenge to the USD.”
“But beyond that, doubts about the US growth picture are arguably too cautious and by contrast the Eurozone growth picture still looks more challenged. We stick with a bullish 1 and 3 month forecast.”
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