USD: Driven by multitude of factors - Westpac

According to Richard Franulovich, Research Analyst at Westpac, USD has another 1% or so upside to bring it into line with the yield spreads but still wary about multi week prospects even though Washington shutdown and debt ceiling risks have been punted to mid-Dec and storm damage estimates have been revised down.

Key Quotes

“FOMC sure to announce balance sheet tapering but they likely cut PCE and neutral rate forecasts too and the dots likely migrate in a dovish direction.”

“Base effects ensure ongoing easing in the annual CPI/PCE prints into Q1 next year while US activity data will look spotty at best until the hurricane disruptions are worked through.”

“Trump’s tax overhaul enjoying some renewed limelight but the path to success continues to narrow. Congress is sure to balk at the sheer size of the package, with personal and corporate tax cuts amounting to more than $5trn, while repealing very popular deductions as offsets will prove tough.”