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14 May 2015
USD upside relies on Q2 rebound – Scotiabank
FXStreet (Edinburgh) - Eric Theoret, Currency Strategist at Scotiabank, believes the USD upside hinges on a better performance of US growth in Q2.
Key Quotes
“Stabilizing inflation in Europe, a steadily improving outlook for the U.K. and shifts in tone at the BoC and RBA have coincided with an ongoing deterioration in U.S. data that has pushed out expectations for policy normalization from a data dependent Fed”.
“The overall shift has weighed on USD via interest rate differentials, with 2Y spreads shifting since the March 17 Fed meeting, with a 31bpt shift in favor of AUD, a 24bpt shift in favor of CAD, an 18bpt shift in favor of GBP and an 11bpt shift in favor of EUR (2Y spread to Germany)”.
“Risk from here centers on the Fed and its data dependent stance, with most policymakers looking to a rebound in growth”.
Key Quotes
“Stabilizing inflation in Europe, a steadily improving outlook for the U.K. and shifts in tone at the BoC and RBA have coincided with an ongoing deterioration in U.S. data that has pushed out expectations for policy normalization from a data dependent Fed”.
“The overall shift has weighed on USD via interest rate differentials, with 2Y spreads shifting since the March 17 Fed meeting, with a 31bpt shift in favor of AUD, a 24bpt shift in favor of CAD, an 18bpt shift in favor of GBP and an 11bpt shift in favor of EUR (2Y spread to Germany)”.
“Risk from here centers on the Fed and its data dependent stance, with most policymakers looking to a rebound in growth”.