USD poised for further gains during the week ahead - Westpac

The US dollar index (DXY) has risen 3% during the past four weeks - the largest four-week gain since February and is poised for further gains during the week ahead, which will weigh on the likes of NZD/USD, according to Imre Speizer, Research Analyst at Westpac.

Key Quotes

“The USD’s recent gains can be justified by US growth picking up steam, aided in large part by very easy financial conditions. A stronger Richmond Fed headline index (+19, well above consensus) matches the strong rise in the Philly and Empire surveys last week, all pointing to a stronger ISM this week. There’s also the tax cut proposal, representing some progress on reforms relative to depressed expectations. The event calendar highlights this week are the ISM surveys and payrolls. Fed’s Dudley and Yellen speak.”

“3 months ahead: As tax negotiations intensify in latter Q4, significant procedural, fiscal and political constraints are likely to become apparent. The size of the tax cut is simply too large to be realistic (costed at more than $4trn over a decade) and repealing deductions will prove politically difficult.”