Storm clouds to clear for the Greenback in the long term
The USD took a hammering into the tail end of last week as the market discounted dovish statements by Mario Draghi and a hawkish tone from the Fed deputy chair Dudley. The market is clearly expecting the Federal Reserve to delay any interest rate hikes until 2018 when the impact of both hurricane Harvey and Irma is better known and tensions in North Korea have eased. Our view is the Federal Reserve should look through these events and get ahead of the curve, however whether they will or not is very hard to gauge at the moment, especially when considering the potential Fed personnel changes on the horizon. The Greenback is mounting a modest recover this morning following Irma’s downgrade and the lack of NK missile launches this weekend. This week’s main data highlight will be Thursday evening’s US CPI release, which will likely need to be above 2% to see the market repricing the yield curve.
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