USD: Topped out? - Rabobank
|Rabobank analysts point out that since the start of the month the DXY dollar index has dropped around 1% triggering speculation that the move is over.
Key Quotes
“The drop in the value of the DXY is led by the turnaround in EUR/USD (which accounts for almost 58% of the index), though the greenback has underperformed all G10 currencies since the beginning of June with the exception of the JPY.”
“The poor performance of the JPY and the USD this month is suggestive of a pick-up in risk appetite. In turn this is a function of the more dovish tone of several central banks in recent sessions which has encouraged investors to glaze over some of the concerns about slowing global growth. In line with this, the discussion in the market has turned to how much easing various central banks may announce in the coming year or so.”
“Since it is clear that most major banks have far less scope for rate cuts than the Federal Reserve, speculation has ensured that the Fed could be a winner in any currency war if Fed Chair Powell is a willing participant in an effort to weaken the USD. While this has fuelled downside pressure on the USD, some of these concerns could prove to be premature. We continue to expect the USD to soften into 2020, but see risk that the greenback could pull back some ground near term.”
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