In view of Richard Franulovich, Research Analyst at Westpac, key structural bullish USD drivers are still intact as a strong patch of US data in Q2 and a more “assertive” Fed have placed renewed focus on “US divergence”, providing ample fuel for the USD.
Key Quotes
“Against that, Eurozone data has been weak into Q2, raising the risk of a more protracted activity downswing and the ECB pushed back the possibility of a interest rate increase deep into 2019. On the cautionary side, US outperformance may be approaching a local peak; the differential between our US and global data surprise indices is at unsustainable highs.”
“Escalating US-China trade tensions and Eurozone political instability – neither of which are likely to be meaningfully defused in the near term – should provide an additional bid for USD (outside of key safe havens). The fate of NAFTA, a long simmering concern, is next in line as a source of market risk.”
