US: Highly accommodative financial conditions - Westpac

US PMI surveys are breaking impressively higher with 12 year highs in the services and manufacturing ISM notable examples, Richard Franulovich, Research Analyst at Westpac.

Key Quotes

“Highly accommodative financial conditions point to yet more upside surprises in coming months.”

“Even with a potentially centrist Fed chair like Powell, the Fed voting rostrum has a hawkish bias in 2018 - voting regional doves Kashkari, Evans and to a lesser extent Kaplan are replaced by Mester (known hawk) and Mullinix (from the typically hawkish Richmond district). The pool of candidates that Trump will draw from to fill the four vacancies on the Board of Governors has a hawkish slant too (Hubbard, Warsh & Taylor).”

“USD index should continue to forge ahead through Q4 but as tax negotiations intensify in Q1, significant procedural, fiscal and political obstacles to large tax cuts are likely to become apparent, checking the USD’s upside.”