USD: Current trends lower remains intact – CitiBank

Analysts at Citibank see the negative trends for the US dollar intact. In the short-term they forecast the DXY could rise to 94.40 and to drop below 90.00 on a six-twelve month horizon. 

Key Quotes:

“Our base case heading into 2021 is for a Biden/Harris led government, whilst Congress will be split with Republican control of the Senate and Democrat control of House of Representatives. Less uncertainty is a risk asset positive/ USD negative.”

“There will be no rush to remove the loose fiscal/ loose monetary mix support in our view. As summer data trends decelerate, further Fed support for real rates markets will be increasingly likely in our view, keeping the current USD trend lower intact.”

“The Fed will likely also be keeping an eye on the trajectory of USD real yields. If $ real yields, from intentionally suppressed levels, rise too far, too fast, this may unwind all of the “good work” achieved so far. Therefore the Fed’s shift to average inflation targeting allows it the flexibility to keep policy dovish.”