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27 Aug 2013
Flash: USD theme still intact? – UBS
FXstreet.com (New York) - FX investors have generally embraced the stronger USD theme in recent months while keeping a wary eye on rising US yields − after all if financial conditions tighten too much that could stop the dollar’s advance in its tracks, notes Research Analyst Gareth Berry at UBS.
Key quotes
Now, not one, but two US economic reports have disappointed in quick succession. First, new home sales on Friday plunged m/m, and Monday’s durable goods orders came in soft too.
Could this be evidence that tighter financial conditions are already having a detrimental impact? Perhaps, “but our economics are not overly concerned for now, and maintains the view that the Fed is likely to announce a start to QE3 tapering at the Sept 17-18 FOMC.”
“Apart from a general deterioration in US economic dataflow, a second fear commonly expressed by FX investors is the risk that a healing labor market
will entice discouraged workers back into the labor force, boosting the participation rate and thereby preventing the unemployment rate from falling towards one of the Fed’s ‘thresholds’.”
Key quotes
Now, not one, but two US economic reports have disappointed in quick succession. First, new home sales on Friday plunged m/m, and Monday’s durable goods orders came in soft too.
Could this be evidence that tighter financial conditions are already having a detrimental impact? Perhaps, “but our economics are not overly concerned for now, and maintains the view that the Fed is likely to announce a start to QE3 tapering at the Sept 17-18 FOMC.”
“Apart from a general deterioration in US economic dataflow, a second fear commonly expressed by FX investors is the risk that a healing labor market
will entice discouraged workers back into the labor force, boosting the participation rate and thereby preventing the unemployment rate from falling towards one of the Fed’s ‘thresholds’.”