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    USD faces fresh headwinds - Westpac Sandeep Kanihama

    Richard Franulovich, Research Analyst at Westpac, suggests that the potentially softer retail sales could weigh while the Fed is likely at best neutral if not negative for the USD.Key Quotes“Risks favour USD index testing recent 92.0 lows. The key control retail sales group is due a correction after last month's unsustainably strong 0.9%, the subsequent month after such gains typically nearer 0.2% vs consensus at 0.3%. Soft payrolls add a layer of caution over the consumers’ health too.The FOMC likely downgrades their assessment of the labour market given May's poor showing. The Fed is unlikely to offer a balanced risks assessment either, and given the UK referendum 23 June and pending June payrolls it makes little sense to signal 27 July is live. But with a majority (9 among 17) calling for 2 hikes in 2016, a shift in the median 2016 dot is unlikely, though the distribution likely shifts dovishly, certainly the 7 calling for 3-4 hikes in 2016 could be trimmed, if only because there are now fewer meetings into year’s end. The long term neutral rate (3.25%) likely falls 25bp, as it has done in all SEP updates in recent years. All told hardly a USD bullish backdrop.”

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