USD: Trend is still to the downside, but it’s not a straight line – CIBC
|The trend for the US dollar continues to be biased toward more weakness according to analysts at CIBC. They warn it is not a straight line and forecast DXY at 93.28 by the end of the fourth quarter.
Key Quotes:
“We’ve been bearish on the USD against overseas majors, and while a lot of the available ground is now behind us, there’s still room for a further adjustment in the quarters ahead. Concerns over a restoking of the virus haven’t been enough to trigger a flight-to-safety run that favours the greenback over other majors, just as equity markets haven’t wavered in looking beyond the current situation towards a further recovery ahead.”
“US data has been mixed, with some concerning signals from consumer confidence and loss of momentum towards lower jobless claims, but pleasant surprises on housing and durable orders. Somewhat weaker monthly growth in the near term could help the dollar hold ground in the very near term if it increases risk aversion temporarily, particularly against European majors where heavy existing euro longs and Brexit uncertainties might weigh.”
“We still see room to extend some USD weakness in 2021. This is, after all, a correction for a currency that was overvalued on trade fundamentals vs. Europe and Asia, and which no longer has the support it once had from a divergent central bank policy.”
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