Sweet spot for further USD weakness during H2 – MUFG

The US Dollar weakened further in July as it fell to fresh year-to-date lows. Economists at MUFG Bank analyze Greenback’s outlook.

US Dollar to rebound in the H1 of next year

We expect the US Dollar to weaken further through the rest of this year. 

The main risk to our view would be if US inflation proves more sticky than expected thereby limiting room for Fed cuts, and/or if the US economy becomes too hot or too cold. 

In our forecast profile, we show the US Dollar beginning to rebound in the H1 of next year to reflect the risk of a sharper US/global slowdown in response to tighter monetary policy that boosts demand for safe havens such as the USD.