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After breaking above the 93.00 level, the US Dollar Index (DXY) is set to test higher levels as reopening, a strong vaccination drive and stimulus payments produce a strapping rebound in coming months, according to economists at Westpac.

Massive fiscal support and rapid vaccine rollout dovetail to stoke growth  

“Stretch targets of 94.50, the top-end of the DXY’s 2020Q3 range look increasingly achievable in coming weeks as the US and Europe slip into dramatically diverging recovery paths.”  

“US rebound hopes have risen sharply but adaptive expectations have a habit of falling short when growth momentum shifts as rapidly as it has in the US. The near 20-point surge in the March Conference Board consumer confidence index cements the case for a consumer-led Q2 revival. A wide array of data points including payrolls, retail sales and PMIs are likely to surprise on the strong side in coming weeks.”  

The medium-term USD bear trend has been adjourned, until sometime in 2021H2. EC President von der Leyen says European vaccine deliveries will hit 100M doses per month by April, so Europe should have her vaccination act together by Q3. By then, second derivative US rebound measures will probably be cresting too.”