USD keeps the bearish note medium term – TDS

According to FX Strategists at TD Securities, the greenback’s medium term stance remains tilted to the bearish side.

Key Quotes

“Low inflation remains a concern for the Fed even after a positive surprise for September CPI. We continue to expect three rate hikes to end-2018, with December more likely than not. Health care, DACA, hurricane relief and other fiscal priorities are likely to preclude a big tax deal this year, and shutdown risks loom after December 8. GDP growth should rebound in Q4 after a hurricane-weakened Q3 to expand 2.1% this year”.

“The convergence trade is well underway and has further to run as other CBs move to normalize. While it may see a small bounce near term amid positioning risks, the medium-term trend of broad weakness remains intact. Tepid growth, sluggish inflation, and toxic politics combined with capital flows and valuation add up to a bearish environment overall for the USD".