USD: Poor momentum extends - Westpac

The USD’s poor momentum extends, the latest leg pinned on intensifying protectionist rhetoric/policy from the Trump admin, favouring defensive currencies such as EUR and JPY, along with Mnuchin’s USD comments, according to Richard Franulovich, Research Analyst at Westpac.

Key Quotes

“He explicitly reiterated the long run “strong USD” mantra, but a stretched momentum trade in search of new catalysts instead latched onto the line that, “…a weaker dollar is good for us as it relates to trade and opportunities,” reading that as benign acceptance of the recent slide in USD.” 

“The USD’s decoupling with yield support has echoes of 2003-2004 when the USD similarly struggled to capitalise on rising yields as the “twin deficits” took hold.”