Large banks: outlook for USD
Morgan Stanley: Whether or not the dollar index can hold onto its gains remains to be seen. The weekly close will be important as failure to close above 86.74 will see an end to what has been an incredible 12 consecutive weeks of higher closes. Its longest winning streak since President Nixon allowed the dollar to float in 1971. Todays’s FOMC minutes will thus be important. Should the minutes come in more dovish than the market is expecting, then we could see further USD correction.
Credit Suisse: The FOMC minutes from the September meeting will provide insights into the decisions to retain the “considerable time” language and to release an exit strategy. We can imagine that some participants advocated a stronger emphasis on data-dependence. While we remain fundamentally bullish on the USD, we think USD longs could see further consolidation as the market waits for the 29 October meeting.
Barclays: The recent upward revision to the Fed’s Fund rate projection reinforces our view that the USD will stay firmly on a medium-term appreciation trend as the economy continues to recover, the labour market tightens and inflation surprises to the upside of the Fed’s forecasts. In addition, we expect the Fed to start hiking in June 2015, earlier than current market pricing of October 2015, and with a risk that it may tighten in March 2015 should the economy improve faster.