Courtesy of the National Australia Bank’s FX strategy team, here’s the bank’s latest G10 currency views “in a tweet”.
Borrowing from the success of Twitter, each view is communicated in 140 characters or less, providing an excellent synopsis for the time-poor.
One prevailing theme is they all involve the US dollar.
Here’s the NAB’s view on what short-term factors are likely to drive the greenback:
The onus is clearly on the data to prove that Q1 GDP and March/April inflation readings do indeed represent transitory weakness. Evidence of a re-acceleration in earnings growth, and a renewed upturn in the Fed’s preferred core-PCE deflator readings, are surely paramount here. This week’s PCE and employment reports will therefore both be very important as we head towards the 13-14 June Fed meeting. In the absence of exceptional foresight on what the coming weeks US data will show, or the messaging will be out of the FOMC, we are not inclined to adjust our dollar forecast at this juncture. ECB messaging out of its 8 June meeting is also going to have significant bearing on the overall US dollar trend given the euro’s weight in dollar indices.
While the NAB has decided to leave its longer-term currency forecasts on hold for the next few weeks, a sage idea given the enormous economic events calendar that lies ahead, strategists at the bank note that US bond yields and the US dollar have “tended to rise in front of FOMC meetings at which a rate rise is generally expected”.
According to the FedWatch Tool from the Chicago Mercantile Exchange (CME), the probability of a 25 basis point hike in the Fed funds rate in June currently stands at 83.1%.