The US dollar has recently posted ten and eighteen-day low
against both the euro and the pound respectively. This belies the excellent
growth data that has been surfacing from the US throughout March.
The highlights from last week included some strong US retail
sales numbers, a positive US bank stress test result and some further
impressive US manufacturing growth figures. The dollar sold-off on Friday
however, largely a as a result of the softer-than-expected US inflation figure,
which caused some players to revise their bets on the likelihood of ‘QE3’ from
the US Federal Reserve.
Fed Chairman has indicated that QE3 is unlikely to be
adopted and we maintain this view, which should aid the dollar this year. As
the Fed’s Dudley reminded us yesterday, this is all contingent on the
maintenance of the uptrend we are seeing in the US economy. Despite Friday’s
poor US consumer confidence figure, there is little need to revise our bullish
expectations for US GDP in 2012.
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