What is the outlook for the US dollar into year-end?
Here is their view, courtesy of eFXdata:
Nordea Research flags a scope for USD gains into year-end on the back of tightening USD liquidity impulse.
“Since Mnuchin and the US Treasury prefunded a huge fiscal deal that is likely not going to materialize on this side of the election, the USD liquidity impulse has taken a beating due to Treasury prefunding/cash hoarding ahead of the fiscal deal,” Nordea notes.
“The USD usually regains its footing after a while when the USD liquidity impulse tightens, alongside weaker risk appetite and flatter yield curves. This could be the case over the next 1-2 months before a (much) better 2021 with continued wide scaled QE alongside a fiscal deal that will allow the US Treasury cash account to drop in size,” Nordea adds.
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