Most Scenarios Likely To Keep The USD On The Defensive - BNPP

While reading into the cross-market impact on the dollar from equity and rate markets has been somewhat challenging lately, we believe most scenarios will leave the USD on the defensive.

If risk continues to rally with only limited US yield upside, the dollar is likely to continue losing ground against the EM and G10 commodity exporter bloc. If US yields start rising again, it’s still not clear whether the USD will be able to benefit as growth expectations are probably still not robust enough to tolerate renewed Fed tightening.

We thus continue to see some further upside in EURUSD to 1.14 and downside in USDJPY to 110 by end-Q1.

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