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- Fed set to support risk sentiment, weighing on the USD – HSBC
Fed set to support risk sentiment, weighing on the USD – HSBC
FXStreet reports that in the view of economists at HSBC, a patient Fed will remain a headwind to the USD, while the implications of the fiscal plan remain muddied.
“The FOMC left the federal funds target range unchanged at 0-0.25%. The USD weakness was seen during the press conference where Fed Chair Powell reiterated that it was too early to talk about tapering. Mr. Powell also noted that employment was still 8.5 M below its pre-pandemic level and indicated that closing much of this gap would be an important criterion for tapering. As such, the release of Nonfarm Payrolls on 7 May is likely to be a market focus. We believe a patient Fed will remain a headwind to the USD.”
“There is a trade-off between the cyclical upside for the USD and the structural deficit downside. As the USD is a ‘safe haven’ currency, there is also a trade-off for risk appetite between extra government spending and higher taxation. For now, we expect the cyclical and ‘risk on’ aspects to win out. We expect some modest USD weakness this year, as the global economic recovery gains momentum.”
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