USD is under renewed downward pressure - Westpac

The US dollar is under renewed downward pressure following the US Administration’s failure to get enough support for its healthcare repeal bill notes Imre Speizer, Research Analyst at Westpac.

Key Quotes

“The bill was seen as the first of the major reforms in the new Administration’s fiscal agenda, and its failure will be read as a sign of further challenges to come. Thus, the market is unwinding a good chunk of the post-US election long-USD trade. A break in the US dollar index (DXY) below 99 would signal further weakness ahead.”

“This week’s event calendar has a heavy slate of mostly second tier data – Markit’s services PMI, the Conference Board and Michigan consumer surveys, the Richmond and Chicago PMIs, pending home sales and the third and final update for Q4 GDP. Fedspeak includes Evans, Kaplan, George, Rosengren, Williams and Mester.”

“3 months ahead: Incremental news continues to signal there will be less tangible Trump stimulus than many had assumed. The struggle to craft legislation for a new health care bill that can pass the House, where Republicans enjoy a strong 21 seat majority is just the latest example. Tax reform and infrastructure will potentially run afoul of the same challenging political realities in a few months: even if Senate filibuster risks can be dodged via the 2018 reconciliation bill (needing just a simple majority vote) the Republican party remains divided on infrastructure, border adjusted taxes and gutting government agencies. We suspect the USD will falter into mid-year, but resume its uptrend thereafter.”