USD has probably made a cycle low – Westpac

According to Imre Speizer, Research Analyst at Westpac, despite reasonably firm US data and interest rate spreads favouring the USD over most other developed currencies, the US dollar has performed poorly since early November.

Key Quotes

“Part of the explanation for that is surely the uncertainty of passage of US tax reforms. Key big picture risks during the next few weeks include: tax reform progress through Congress, and shutdown risks around the 8 Dec government funding expiry. Key data near term includes the PCE deflator, and durable goods orders.”

“3 months ahead: The house and Senate tax plans differ markedly and it’s not clear there is a compromise that could pass both chambers. The Senate has more stringent rules and thus includes delays to corporate tax cuts and controversially, the full repeal of state and local income and property taxes, a measure that could easily lose 20-30 House Republican votes (cannot afford to lose more than 22 House votes). Republicans hope to have legislation on the President’s desk by Xmas but challenges in crafting a single bill that fits competing interests in the House and Senate make that a tough ask.”