USD liquidity is increasing, with around $170 billion being used from the Overnight Reverse Repurchase Agreement (ON RRP) up to now in February.
“It still seems highly probable that a tapering announcement could come at this month’s meeting, and the outlook for USD liquidity is hence set to improve independent of the Fed’s rate decision,” says macroeconomic analyst Elias Lisberg Glistrup.
He furthermore observes that sentiments are approving and that there is a growing belief that the US economy will not face a downturn.
Glistrup states that he “would not be entirely surprised to see flows from deposits and MMFs into riskier alternatives.”