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The US Dollar has gained ground amid concerns about trade talks between the US and China. What’s next?

Here is their view, courtesy of eFXdata:

 Citi discusses the USD outlook and sees  limited near-term gains.

USD Index (DXY) recovers almost all its late January losses this week though with much of this strength driven by weakness elsewhere  (further EUR declines following weak eurozone data and dovish ECB speculation; GBP weakness amid heightened Brexit uncertainty; AUD weakness following RBA Governor’s move to a neutral bias),” Citi notes.

“Stronger US data helps (ISM services and payrolls) but a  further bout of USD gains likely notwithstanding in the short term,  the dovish removal of the Fed’s forward guidance on rates in the January FOMC meeting amidst the backdrop of continuing strength in the US economy likely supports a risk rally (including in FX) over time against USD,” Citi adds.

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