USD vulnerable near term – BTMU

Lee Hardman, Currency Strategist at BTMU, expects the greenback to remain under pressure in the short term.

Key Quotes

“The US dollar has remained on a softer footing in the Asian trading session following the release of the weaker than expected US retail sales report for July. The report has dampened expectations for the Fed to resume rate hikes this year reinforcing the favourable conditions for high yielding and emerging market currencies in the near term which should continue to outperform”.

“Nevertheless, the weaker than expected report will keep the market comfortable that the Fed is no hurry to resume rate hikes. With personal consumption growth set to moderate in Q3, a reversal of weakness in other areas such as the large drag from inventories will be required to support a rebound in economic growth”.

“The release this week of the minutes from the latest FOMC meeting on the 27th July will be scrutinized closely to assess if the Fed remains comfortable to leave its monetary stance unchanged… However, we doubt that the Fed will be ready to raise rates until December at the earliest leaving the US dollar vulnerable in the near-term”.