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According to Richard Franulovich, Research Analyst at Westpac, USD is facing some corrective pressure as the ECB sheds some of its caution in recent commentary, key EM markets stabilise (for the time being) and as US midterm elections come into focus.

Key Quotes

“Yet yield spreads continue to march in the USD’s favour and US growth remains indisputably strong, high frequency indicators suggest Q3 could come close to matching Q2’s punchy 4.2% growth rate.”

“There’s still plenty of yield-fueled potential upside for the USD with implied Fed rate hike expectations still shy of the median Fed dot out to 2021, even after the recent repricing.”

“But more near term consolidation for the USD and a perhaps a deeper correction ahead of a resumption of the medium term uptrend cannot be ruled out.”