Bullish USD narrative reappearing - Westpac

Richard Franulovich, Research Analyst at Westpac, suggests that the bullish USD narrative reappearing, not least because of the very constructive price action, Dollar Index closing above its 200d moving average for the first time in more than four months.

Key Quotes

“21% odds for a 21 Sep Fed hike are priced in, arguably too low and can trend to nearer 35-40%. The 26-27 July FOMC is likely to have a more upbeat message. Officials will be relieved financial conditions remain buoyant post-Brexit while strong payrolls, retail sales and PMIs will encourage officials the economy is on a solid track.

The Fed is unlikely to explicitly signal that Sep is live but they are sure to sound overall less rather than more dovish. Average hourly earnings and other wages indicators signal upside risk to the Q2 ECI while already released regional PMIs flag solid PM updates next week. DXY on course for a test of the Feb highs at 98.6.”