Analysts at HSBC consider that the US dollar is facing downside risk over the near term but they do not believe the USD is set to enter a secular, long-term bear market.
Key Quotes:
“For the USD, further US fiscal stimulus could provide a cyclical boost or it could see the USD weaken due to a “risk-on” mood. For now, the latter reaction function seems more likely, given the over-riding dominance of ‘Risk On- Risk Off (RORO). In other words, the USD may face downside risks over the near term. But, we do not believe that the USD is set to enter a secular, long-term bear market”
“We still believe it is not the time for a USD bear market, while the movements in the USD are still dominated by the RORO phenomenon for now. Our base case is for greater differentiation against the USD within G10 FX, with the AUD and NZD outperforming the EUR, GBP, and CAD.”
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