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The US dollar has been underperforming against its major rivals. What is the near-term outlook for USD?

MUFG Research discusses the USD outlook and flags a risk for a reversal in the US equity markets but sees a scope for the USD to remain offered in the near-term.

“The evidence emerging in the high frequency data won’t be seen in the more familiar data for the markets until late this month or into August onwards but based on current conditions there are increasing risks of the data turning less favourable in the US relative both to the initial phase of recovery and to Europe,” MUFG notes.

“So we remain cautious over the sustainability of the rally in US equity markets. But much of these risks are well known in the markets that suggest Fed policy, expectations of more fiscal stimulus and the resilience of tech can propel equities higher. That implies continued USD underperformance for now,” MUFG adds.

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