USD index to likely range 100-104, medium term bias remains higher - Westpac

Richard Franulovich, Research Analyst at Westpac, notes that the USD and yield spreads start the year steadier, digesting late 2016’s relentless Trump induced reflation rally.

Key Quotes

“USD index likely ranges 100-104 though the medium term bias remains higher.”

“Reflation hopes took a small knock after Trump’s news conference but the underlying reflationary impulse is still very much intact - expectations simply got ahead of the game.”

“The timing, size and composition of a prospective US fiscal easing will be the critical swing variable for US growth/inflation expectations and the Fed hike profile in the year ahead.”

“More details will be forthcoming once Trump cabinet is sworn in and Congress/ White House deliberations begin.”