UBS - This week's key points for currencies: A Key Week For The Dollar

UBS - "The dollar continues to trade at weak levels against the euro, pound and Swiss franc as the Federal Reserve is still printing money and buying bonds. In the week ahead the Federal Open Market Committee is likely to taper its asset purchases by another $10bn to $45bn a month. We expect the greenback to rise across the board as the end of quantitative easing comes into sight by the autumn. But this month's FOMC decision may only provide marginal support to the dollar as the Fed will still only be half way through tapering its bond buying. In contrast, US data in the week ahead may move the greenback more. April's ISM and payrolls reports are due as well as March's core Personal Consumption Expenditure prices. The latter provides the Fed's target measure of inflation. A higher print here would increase expectations that faster inflation will spur the Fed to become one of the first of the major central banks to start raising interest rates next year, underscoring our underlying bullish view on the dollar. This week's key points for currencies are:
- FOMC, key data due in the week ahead for dollar
- stay wary euro but April CPI unlikely to trigger easing
- BoJ set to keep policy unchanged in the week ahead
- be cautious Cable given MPC concern on external deficits
- Q1 CPI makes Australian dollar sell on rallies again
- hawkish RBNZ capping AUDNZD for now
- stay bearish Canadian dollar on cautious Poloz."
Mansoor Mohi-uddin Managing Director Head, Foreign Exchange Strategy UBS Macro Research

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