At Any Rate Global FX: Keeping the bearish USD view
Why The Dollar's Weakness Is Here to Stay Despite Short-Term Wobbles
The US dollar remains bearish over the medium term, driven by the US catching down to global growth and supportive fiscal and monetary policies elsewhere.
Despite some recent technical signs pointing to temporary dollar strength, these are seen as tactical adjustments within an overarching weaker dollar trend.
Systematic models and risk appetite indices have flagged some overbought conditions, but historical experience warns that these indicators can break in periods of structural shifts or significant cyclical change.
The dollar-CNY fixing has shown a steady decline since mid-April, signaling central bank support for a stronger yuan, which aligns with the dollar weakening narrative.
However, seasonally front-loaded dividend outflows from China may cause some short-term dislocation between fixing and spot prices, possibly extending into late July.
Altogether, the broad narrative favors continued dollar weakness, with short-term consolidations or tactical retreats not altering the medium-term bearish view.
Dollar Bearish View Holds
- The dollar view remains bearish despite recent sizable gains and potential consolidation.
- Structural US policy shifts and global monetary conditions support a medium-term weaker dollar outlook.
Dollar CNY Fixing Signals Weakness
- Dollar CNY fixing has trended lower for three months signaling expected dollar weakness versus CNH.
- CNY spot may decouple temporarily from fixings due to technical flows and seasonal outflows.