USD Index: Long downtrend appears unlikely – MUFG

FXStreet Insights Team FXStreet

The US Dollar Index is close to testing the recent intra-day low from 15th November at 105.34. However, economists at MUFG believe that the USD sell-off does not have too much further to go.

FOMC minutes fail to provide conviction for higher terminal rate

“The release of the FOMC minutes last night in our view failed to provide enough conviction to the belief expressed by Fed Chair Powell that the terminal rate for the fed funds would need to be higher than the September media dot implied (4.625%).”

“The US Dollar will remain vulnerable to speculation of an end to the tightening cycle. The 2s10s continues to invert and is indicative of a growing belief that inflation risks are receding but with the Fed not in a position to pause. But the escalation of covid infections to record high levels in China and recession in Europe also mean there are limits to the scale of USD selling that should mean this long Dollar squeeze does not have too much further to go.”

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FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

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