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USD: Get ready for upside irrespective of lift-off timing - Westpac

FXStreet (Delhi) – Sean Callow, Research Analyst at Westpac, suggests that regardless of when exactly the Fed tightens, the mere prospect of such action seems enough to underpin USD through Q4.

Key Quotes

“As for the US dollar, there might be at least some passing pressure from manufacturing surveys ahead of the 2 October payrolls report.”

“The Philly, Empire and Richmond Fed surveys all slipped into negative territory in Sep, fl agging risks of a sub-50 national manufacturing ISM. With many viewing the FOMC as having looked for reasons not to raise rates in Sep, this could see US yields slip further. But so long as job creation continues at the healthy pace of the past 2+ years, the Fed will continue to talk about the case for higher rates.”

“In an FX world where the BoJ and ECB are pursuing QE, with talk of increasing it before yearend and markets are pricing risks of a rate cut by the RBA, RBNZ and BoC - not to mention almost all of Asia - the US dollar is likely to suffer only modest setbacks.”

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