ANZ Research discusses the USD outlook and sees a scope for a top a turn over the coming weeks.
"It is hard to go against USD strength at present, given the continued re-pricing of the Fed. Yet, we caution against extrapolating current trends too far. The strong dollar cycle is looking long in the tooth. The Fed may have only started the hiking cycle, but a lot of rate hikes have already been priced in. We may not have reached peak Fed hawkishness, but we must be getting close. In addition, the DXY is overvalued based on our fair value estimate," ANZ notes.
"A lot of negative news has been priced into the EUR. With French election risk now out of the way, it may not take much to turn sentiment around. We are revising our FX forecasts to incorporate a bit more near-term dollar strength, but we see the DXY starting to turn lower from mid-year onwards," ANZ adds.
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