USD vulnerable to breaking down to a one-year low - Westpac

The US dollar has shown some promise during early August but that was dashed after a disappointing CPI report last Friday and is back on the back foot and is vulnerable to breaking down to a one-year low, explains the research team at Westpac.

Key Quotes

“That’s despite the overall complexion of economic data recently exceeding expectations. Markets appear to be more interested in inflation indicators, because that’s an area which has softened lately and is key to future Fed rate hikes.”

“This week’s Jackson Hole speech (Fri) by Fed Chair Yellen will be interesting in that regard. Data releases are secondtier: Richmond/Markit PMIs, new & existing home sales, durable good orders.”

“3 months ahead: Q4 offers a more forgiving environment for the USD than Q3. Washington is rushing into another debt ceiling and government shutdown showdown in Sep/Oct. But by Q4, these event risks will have been negotiated, seasonals are more supportive, and Trump reflation will enjoy a fresh burst of energy as Washington pivots towards tax cuts.”