The U.S. dollar continues to display high volatility. What is the outlook for the pair?
Here is their view, courtesy of eFXdata:
Credit Suisse Research discusses the key drivers for the current market conditions and the related USD performance.
“The broad USD continues to trade in volatile fashion, exhibiting both high directional volatility and wide dispersion across different currency pairs. The single biggest driver of general directionality remains the broader performance of risky assets such as equities and credit, with positive days in the latter typically marked by a weaker USD and vice versa. From the start, we have maintained that key preconditions for a more sustained decline in the USD included both a reliable easing in USD funding tightness as well as a peak in Covid-19 growth rates in major economies,” CS notes.
“In this light, we see the rally in risk and the setback for USD as logical. At the same time, we remain sufficiently sceptical about aspects of the USD sell-off to suggest only taking anti-USD / pro-cyclical exposure in currencies that have the best scores when it comes to key metrics such as fiscal rectitude, for example AUD and CAD in G10 space, or RUB and KRW in EM space,” CS adds.
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