Back
22 Apr 2015
Greenback in focus and core shifts - Scotiabank
FXStreet (Guatemala) - Camilla Sutton, chief currency strategist at Scotiabank explained that the broader trend in the USD remains higher; however the story has shifted to a more balanced outlook and this shift continues today.
Key Quotes:
"The combination of rumours of more stimulus in China, stronger than expected inflation in Australia, a hawkish twist at the BoE and an improved growth outlook in Germany all feed into the general rebalancing we are seeing globally. Below we highlight some of the core shifts."
"Growth—early in January, consensus expectations was that U.S. growth would come in at 3.2%, however after a soft Q1 these estimates have fallen back below 3%; at the same time the expectation for European growth has improved—in part due to the combination of currency depreciation, low interest rates, QE and low oil prices providing a stimulative boost. Accordingly, even as the U.S. is still expected to outperform Europe, the surprise has favoured Europe and helped to balance the USD outlook."
"Monetary policy—the expectation for the first interest rate hike by the Fed and the path of rates from there has been pushed farther out into the future; while the ECB has unleashed aggressive policy that seems to be relatively stable (the risk of more aggressive policy is low); accordingly even though Fed interest rate hikes will eventually favour the USD, to date the surprise has been on a less aggressive Fed outlook than was previously priced in."
Key Quotes:
"The combination of rumours of more stimulus in China, stronger than expected inflation in Australia, a hawkish twist at the BoE and an improved growth outlook in Germany all feed into the general rebalancing we are seeing globally. Below we highlight some of the core shifts."
"Growth—early in January, consensus expectations was that U.S. growth would come in at 3.2%, however after a soft Q1 these estimates have fallen back below 3%; at the same time the expectation for European growth has improved—in part due to the combination of currency depreciation, low interest rates, QE and low oil prices providing a stimulative boost. Accordingly, even as the U.S. is still expected to outperform Europe, the surprise has favoured Europe and helped to balance the USD outlook."
"Monetary policy—the expectation for the first interest rate hike by the Fed and the path of rates from there has been pushed farther out into the future; while the ECB has unleashed aggressive policy that seems to be relatively stable (the risk of more aggressive policy is low); accordingly even though Fed interest rate hikes will eventually favour the USD, to date the surprise has been on a less aggressive Fed outlook than was previously priced in."