Richard Franulovich, the head of FX strategy at Westpac, believes that, despite a notable marking up of U.S. recession and political risks, sustained USD downside (ex-JPY) remains elusive.

• “Short term DXY weakness likely limited to the base of the 3mth uptrend channel 98.0-98.50.
• A more sustained USD decline would require the Fed ditching their “mid-cycle adjustment” in favour of a more protracted easing cycle. Several Fed officials have said they are not even inclined to cut rates again, though to be fair their calculations will evolve with the incoming data and progress on US-China trade talks.
• A genuine turnaround in Eurozone growth fortunes would also usher in a bout of USD weakness but we are not holding our breath; there’s no end in sight for Brexit and trade uncertainty is likely to linger for many months.
• Impeachment is not a genuine risk for the USD – almost ½ the Senate Republican conference would need to join all 47 Democrat senators to deliver the 67 votes for a conviction; a tall order. Though, the USD will be marked lower if Trump’s re-election odds are battered.”