US Dollar Index to drop 3-4% by Q1 2022 – MUFG
|The US dollar dropped by 2.1% in April, reversing nearly all the gains recorded in March. The very strong message from the Fed in April signalling continued determination to maintain ultra-loose monetary policy will ensure no sharp move in rates and therefore help keep the US dollar at weaker levels, as reported by MUFG Bank.
FOMC to maintain a cautious stance
“A key factor going forward in holding a moderately bearish USD call is the continued dovish guidance from the Federal Reserve despite the surge in GDP growth now unfolding. While the FOMC acknowledged the brighter outlook ahead there was no shift in communication on the timing of a change in policy stance.”
“Most of our G10 relative yield curve regression models point to further US dollar weakness. That would change if there was a substantial further move to the upside for yields. Furthermore, under a scenario of a more synchronised global growth upturn, other G10 central banks will be shifting their QE/rate guidance either before or around the same time as the Fed, limiting the scope for USD strength.”
“The US dollar has a tendency to weaken in the early stages of a global growth upswing but our implied 3.4% drop in DXY reflects US economic strength.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.