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9 Feb 2015
The USD remains well supported fundamentally - RBS
FXStreet (Bali) - According to FX Strategists at RBS, the USD remains well supported fundamentally, with Friday's strong NFP reinforcing that belief.
Key Quotes
"Friday's strong employment report does not, on its own, alleviate the concerns about faltering growth abroad, still-low inflation, and falling inflation expectations and their potential impact on FOMC policy."
"The “conflict” for FOMC policy between a jobs market that appears to be picking up steam and muted inflation and inflation expectations may not be resolved without an update from FOMC leadership."
"The Fed’s contention is that it can hike the policy rate as long as it has “reasonable confidence” that inflation will be “moving up over time” even if current readings of inflation are below target."
"The risks more clearly favour the FOMC keeping that tone in upcoming communications, which would propel the FOMC as hawkish amid global dovish policy signaling and outright policy easing."
"As a result, we think the USD remains well supported fundamentally and that positioning-related USD pullbacks are likely to be short-lived."
Key Quotes
"Friday's strong employment report does not, on its own, alleviate the concerns about faltering growth abroad, still-low inflation, and falling inflation expectations and their potential impact on FOMC policy."
"The “conflict” for FOMC policy between a jobs market that appears to be picking up steam and muted inflation and inflation expectations may not be resolved without an update from FOMC leadership."
"The Fed’s contention is that it can hike the policy rate as long as it has “reasonable confidence” that inflation will be “moving up over time” even if current readings of inflation are below target."
"The risks more clearly favour the FOMC keeping that tone in upcoming communications, which would propel the FOMC as hawkish amid global dovish policy signaling and outright policy easing."
"As a result, we think the USD remains well supported fundamentally and that positioning-related USD pullbacks are likely to be short-lived."