With few good reasons to be bearish on the US dollar, its recent rally is likely to be extended, albeit in a grinding fashion, according to analysts at HSBC.
The USD’s global dominance
“We believe the USD is likely to grind higher and push begrudgingly to a new year-to-date high, not so much because there are great reasons to be bullish on the USD at these levels, but because there are not too many compelling reasons to be bearish.”
“Confidence in the global reflation trade has waned on the back of rising COVID-19 case counts and concerns of an inflation squeeze on spending power.”
“The USD seems happy to capitalise on any return of risk aversion. Should US growth surprise on the upside, the USD could also gain on a further reversal in July’s dovish drift in US rate expectations. However, USD gains from these levels are likely to be languid.”
