USD index appears to be stabilising around 99.0 - Westpac

Richard Franulovich, Research Analyst at Westpac, suggests that the USD index appears to be stabilising around 99.0 and an upbeat Fed that is eager to look past near term economic weakness and a likely decent April payrolls should cement June Fed hike odds into a 70-80% range.

Key Quotes

“As it is, the USD is undervalued relative to yield spreads (see chart across).”

“Would not get too carried away with upside USD potential beyond 101/102 however: there’s a likely final lunge higher in EUR on a probable Macron win after the 2nd round of the French elections, our US data surprise index has yet to hit extreme lows that signal all the bad news is out and base effects turn less supportive on the oil/inflation front in coming months too, a factor that is likely to keep inflation shy of the Fed’s 2% goal.”