USD: Range trade view holds – BBH

Brown Brothers Harriman’s (BBH) Elias Haddad notes that global markets are consolidating as investors watch whether the US-Iran ceasefire becomes a durable agreement. The bank sees the Dollar driven mainly by rate differentials in coming months, with DXY staying in its 96.00–100.00 range, while maintaining a structurally bearish Dollar view on US policy, fiscal and Federal Reserve credibility concerns.

DXY seen confined to established range

"Brent crude oil prices are holding under $100 a barrel, stock and bond markets are consolidating recent gains, while USD is trading on the defensive. The MSCI world stock index rose to a record high, long-term sovereign bond yields are modestly lower across major economies, and the dollar recovered yesterday’s losses."

"We are sticking to our view that while the energy shock may not be over, the worst is probably behind us. If so, end-March likely marked the bottom in risk sentiment. That would leave DXY (USD index) trading off rate differentials once again, keeping the currency within the middle of its nearly one-year 96.00-100.00 range over the next few months."

"Structurally, we maintain our long-held bearish USD view because of: (i) fading confidence in US trade and security policy, (ii) worsening US fiscal credibility, and (iii) the ongoing politicization of the Fed."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)