FXstreet.com (Barcelona) - "The USD index has been grinding
higher since mid-
December, however we suspect further topside from
here will prove tough going amid an abundance of dollar negative
asset market cues." writes Global Strategist Sean Callow at
Westpac. This includes a 3 month highs for crude oil, a VIX index
at multi month lows, a modest shift short term yield spreads
against the USD vs. much of the G10 in the last 2 weeks and ongoing
falls in peripheral EZ sovereign spreads (note: Italian 2yr yields
hit their lowest levels in 32mths this week).
On the plus side for the USD, the FOMC minutes were an unwelcome
reminder that the Fed sees real limits on open ended asset
purchases but it is very unlikely that the "several" members who
favor slowing/stopping asset purchases by mid-2013 would include
any one of the key dovish cabal of Bernanke, Yellen or Dudley.
Suspect it would take several months of 200k+ payrolls gains at
least before the threat of less QE becomes a genuine USD positive.
Elsewhere, the lagged effects of much improved EZ financial
conditions flag a stabilization in the Eurozone data and the
pro-Monti coalition is gaining in Italian polls. "A likely
acrimonious debt ceiling debate in mid-to-early February should
prompt a risk aversion led USD bounce, much as was the case amid
the Aug 2011 debt ceiling debate, but in the interim see greater
scope for the USD index to break down towards 79." Callow