Looser fiscal/tighter monetary story returns to help the dollar - ING

Analysts at ING provided an outlook for the US Dollar ahead of today's Trump-Abe meeting and expect to be supported into next week.

Key Quotes:

"As 2017 has already proved, forecasting the ebbs and flows of the dollar bull trend looks to be a function of timing the positives (looser fiscal/tighter monetary) versus the negatives (trade and threats against under-valued foreign currencies). The dollar had been on the back foot ahead of today’s Trump-Abe meeting, but rallied late yesterday on remarks that a ‘phenomenal’ and ‘comprehensive’ tax package would be introduced over coming weeks. This probably chimes with the confirmation of Steve Mnuchin as Treasury Secretary (expected Sat or Mon). The market will also be preparing for semi-annual testimony from Yellen next Tuesday, where she should be at worst neutral for a dollar into which 50bp of Fed hikes is priced the next 12 months. We sense that today’s meeting with Abe will not be too dangerous for the dollar, with the two leaders instead focusing on the positives – and Abe potentially seeking to appease Trump with offers of infra-structure investment and increased US shael gas purchases. Today’s data may also be dollar positive with YoY import prices rising to levels last seen in 2012 and consumer sentiment remaining strong. DXY to test 101.00 before the Abe meeting and should be supported into next week."