USD: Near term outlook consolidative - Westpac

Research Team at Westpac, suggests that the near term USD outlook consolidative with Bund-Tsy spreads, Italian sovereign spreads, the US yield curve steepener and US inflation breakevens all taking a breather after their relentless Trump driven run-up.

Key Quotes

“USD index can ease back to 100 but doubt it morphs into a bigger pullback: if US yields stabilise here this would oddly make it one the briefest and short-lived sell-offs in recent history. Another HIA-style repatriation of overseas earnings, a more hawkish Fed Board as Trump fills key vacancies and a rolling run of 2017 European political mine fields (Dutch, German and French elections) should all sustain USD strength medium term.”