USD can continue to trek higher near term - Westpac

Richard Franulovich, Research Analyst at Westpac, suggests that the USD/EM is higher and much as one might have expected under a Trump presidency that will seek to redress trade imbalances via protectionist policies.

Key Quotes

“USD gains vs EUR & JPY though are not part of the script, players instead embracing his pro-growth “reflation” agenda – significant tax cuts, clawing back of regulation and a significant infrastructure rebuild – to the exclusion of other extreme parts of his agenda.

US yields and the USD can continue to trek higher near term but much will depend on Trump sticking to his progrowth policy agenda and steering clear of some of the more controversial and extreme parts of his agenda (i.e. protectionism and deportation of illegal immigrants). Given his wayward temperament that is not a done deal. A Fed hike in Dec is not a done deal either. They will be loath to buy into a meaningful fiscal easing without seeing details first.”