USD to continue upward path - Westpac

Analysts at Westpac, points out that the USD has quickly found renewed support, lifting back to 96.9 currently, with the FOMC having walked away from further rate hikes (for the foreseeable future) and activity data beginning to pick up again.

Key Quotes

“US growth outperformance, both with respect to potential and against key trading partners such as Europe, is central to this US dollar rally and the further increase we see to around 98.5 in the second half of 2019.”

“For Europe, we expect the soft data to persist in the first half while political uncertainties remain unresolved before tentative signs of stabilisation. Further, whereas the risks for the US economy are near balanced, across the Atlantic they are clearly skewed downward. Hence we look for the Euro to fall from 1.1277 currently to 1.10 in the second half of 2019. Thereafter only a slow grind higher to 1.15 by end-2020 is expected. Note, this end point has been revised down this month from 1.17 given the persistence of weak momentum and as policymakers become more cognisant of the potential consequences of risks, both known and unknown.”