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USD vulnerable to downside risks – Westpac

FXStreet (Delhi) – Imre Speizer, Senior Markets Strategist at Westpac, suggests that the USD continues to look vulnerable, the setback on September retail sales the latest wound.

Key Quotes

“Yet even with that soft data print to hand, and Fed governors Tarullo and Brainard sounding a note of caution over liftoff (both arguably closer to the FOMC leadership), OIS markets still discount a 30% chance of a Fed hike by year’s end.”

“Dec Fed hike odds understandably won’t fall to zero but they are more likely than not to continue to drift lower, weighing on the USD. Our US data surprise index has further to fall too if past tightenings in financial conditions are anything to go by.”

“The USD index may trade down to 93/94 into year’s end. The longer term uptrend in the USD, though, likely remains intact. Soft data trends in the near term will be a challenge for the USD but 2016 should still see a relatively healthier US growth picture emerge than in many parts of the world.”

“The US data calendar shifts down a gear this week, the main releases being mostly second-tier including the NAHB index, housing starts, existing home sales and Markit’s preliminary manufacturing PMI. Lacker, Dudley and Powell are the main Fed speakers.”

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