Any upside in the DXY is likely to prove fleeting - Westpac
Event Risk:
May CPI the key risk event, many braced for another blowout number. Fed enters blackout period ahead of their 16-17 June meeting.
Bias:
-DXY stabilizing ahead of key risk events in the next week: payrolls, CPI and ECB. A USD friendly mix can be stitched together: whisper talk into payrolls is more reserved, the May CPI will surely reflect ongoing bottlenecks and reopening frictions, while Lagarde has signaled that the ECB is likely to extend pandemic asset purchases at EUR85bn for another quarter.
-But any DXY upside potential likely proves modest while the Fed maintains patient guidance.
Potentially stronger than expected May payrolls and CPI won’t shake the Fed’s resolve. Admittedly more officials are warning to a tapering conversation, but any decision is still many months away.
-Infrastructure talks remain congenial, the White House trimming their proposal to $1.7trn from $2.3trn and the GOP making a $928bn counteroffer. But key sticking points remain on hard vs social infrastructure and how to fund it.
-DXY still a sell on strength, looking for fresh 2021 lows on a 3 month horizon.
May CPI the key risk event, many braced for another blowout number. Fed enters blackout period ahead of their 16-17 June meeting.
Bias:
-DXY stabilizing ahead of key risk events in the next week: payrolls, CPI and ECB. A USD friendly mix can be stitched together: whisper talk into payrolls is more reserved, the May CPI will surely reflect ongoing bottlenecks and reopening frictions, while Lagarde has signaled that the ECB is likely to extend pandemic asset purchases at EUR85bn for another quarter.
-But any DXY upside potential likely proves modest while the Fed maintains patient guidance.
Potentially stronger than expected May payrolls and CPI won’t shake the Fed’s resolve. Admittedly more officials are warning to a tapering conversation, but any decision is still many months away.
-Infrastructure talks remain congenial, the White House trimming their proposal to $1.7trn from $2.3trn and the GOP making a $928bn counteroffer. But key sticking points remain on hard vs social infrastructure and how to fund it.
-DXY still a sell on strength, looking for fresh 2021 lows on a 3 month horizon.