USD: Upside potential extinguished here - Westpac

Upside potential for the USD all but extinguished here, especially now that the currency’s last best hope – a hawkish reprofiling of 2018 Fed expectations has not played out, according to Richard Franulovich, Research Analyst at Westpac.

Key Quotes

“Having struggled to form a solid beach head above 90, DXY looks set to test recent lows around 88-89.”

“The Fed says that the “outlook has strengthened”, boosted 2018 and 2019 GDP projections and added a rate hike to their 2019 dot projections. The unchanged median for 2018 (3 hikes in all) is very fragile too: the June  meeting needs just a single median dot to add another hike for a new 4 hike median to emerge. But despite all the clearly more optimistic signals, the Fed is not overtly more hawkish.”

“Aggressive protectionist stance from the Admin unlikely to ease anytime soon and if anything could escalate into Nov midterms, risks heightened by the departure of more moderate voices.”