Political season reappoints king USD – TDS
We revised our USD profile higher in early Q2, underscoring a shift in our signals and framework towards inflation, TDS FX strategists note.
US Dollar to remain bullish across the board
"Inflation trading strategies remain some of the best performers across FX, highlighting the importance of inflation divergence. Inflation factors have outperformed growth factors, suggesting that ROW/US growth convergence isn't enough to weaken the USD."
"Instead, we think everything needs to go just right in the months ahead, with any surprises likely to benefit the USD. Risk and equity trading baskets have also performed well for most of this year but again those are two themes that work for the USD."
"From here, we expect a 2.5% jump in the BDXY, taking it to 1300 by yearend. That takes EUR/USD towards 1.02, USD/CAD above 1.40 and USD/CNY to 7.40."
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