The US House has passed the budget deal pavingway for it to move to the Senate next week. However, leading into theFed next week this has helped pull in expectations of a December taper. Accordingly, the USD has rallied and is closing the week on a strongernote. Today’s only release in the US is PPI, which will focus the market onone of the key issues for the Fed; an environment of falling prices is notencouraging and though we believe that of the criteria for tapering theFed will see substantial progress on labour markets, financial conditionsas well as government negotiations; it is the disinflationary environmentthat will concern them enough to push the first taper into 2014.
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Scotiabank