USD: More likely to retest recent lows near 93 - Westpac

Richard Franulovich, Research Analyst at Westpac, suggests that the medium term “structural” USD outlook has softened.

Key Quotes

“An inevitable outcome of the growing Fed consensus that trend growth has fallen amid poor demographics and faltering productivity growth, that the Philips curve has flattened and the neutral interest rate has fallen considerably, themes that Chair Yellen is sure to expand upon at Jackson Hole. That said, Yellen will also keep a hike in 2016 on the table, though without committing to one. 60% OIS probability of a +25bp hike by year's end would appear to reflect that risk in any case.

A potentially weaker ISM, following negative leads from the regional Empire and Richmond surveys, and a likely step down in payrolls after outsized June/July gains averaging +274k likely weigh on the USD next week.