Forex Flash: Too early to expect a sustained appreciation in the greenback - BNZ

FXstreet.com (Barcelona) - As Currency Strategist at BNZ Mike Jones notes, “we’ve seen the USD make a few false starts before, as periods of US optimism briefly compel the market to price an end to Fed easing. We need to be cautious about believing this time is any different,” the analyst says.

From BNZ: “Sure, the US recovery is looking a little more assured. But there is still a long way to go before the Fed’s unemployment target is reached. What’s more, US inflation ­– the other half of the Fed’s dual mandate – is weak enough to keep fears of Japanese-style deflation very much alive.”

Mike expands: “The US core PCE deflator recently fell to 14-month lows of 1.13% – well below the Fed’s 2% target. We fully acknowledge the market’s ability to ‘front run’ the US recovery, but these developments suggest talk of an imminent ‘tapering’ of Fed asset purchases is premature,” he concludes.