Market commentary by Westpac research analyst, Richard Franulovich
Says that the negative view on the dollar still persists amid the Trump administration's more aggressive protectionist policies and a probable lack of overtly hawkish Fed signals as the FOMC meeting approaches.
He argues that the Fed will surely hike rates by 25 bps in the coming meeting and retain an optimistic outlook, but says that risks of a strong hawkish signal have eased following "benign CPI reading and weaker Q1 tracking estimates".
Yesterday, the Atlanta Fed trimmed its Q1 GDP forecast to 1.9% from 2.5% following the retail sales figures.
Anyway, Franulovich goes on to say that the Fed's dot plots should trend higher when the economic projections are released in the FOMC meeting but says that it is less likely that it will skew the median towards a fourth hike.
Moving on to politics, he argues that the aggressive protectionist stance from the Trump administration is unlikely to ease any time soon and if anything, it could escalate towards the mid-term elections in November - saying that risks are heightened by the "departure of more moderate voices".
