Richard Franulovich, Senior Currency Strategist at Westpac, on USD performance in Q1 2017

I assume that the US Dollar performance is going to be all about Trump and prospects for a big fiscal stimulus in the United States. Once we get more detail on the size and timing of tax cuts and infrastructure deregulation, we will be able to fully shape the US Dollar outlook. Generally, the bigger the tax cuts and the larger the infrastructure program is, the more it will boost the US growth prospects. Besides all, expectations that the Fed will proceed with its rake hike path this year along with the abovementioned factors should send the Greenback rallying in the Q1.

I believe that the main drivers for the US Dollar would be, obviously, Trump, the Fed and the ECB. If the Trump fiscal programme proves to be larger than expected, it should give the Greenback a further boost. On the contrary, if that programme disappoints, seeing smaller amount of infrastructure spending and a small tax cut, which would obviously be a disappointment, we will witness the Dollar selling.

Nevertheless, I think that we will have to keep an eye on the ECB as well. In the upcoming quarter we may have some indications that the ECB officials are prepared to taper their bond purchasing programme, which is also an important factor that could determine the performance of the US Dollar.

By the end of the Q1, we anticipate the Euro to edge down and eventually finish at 1.05. Talking about the USD/JPY currency pair, our expectation is that it will close the quarter at 114, while the Cable we see finishing at 1.20.