DXY: Dollar forecast to drop 1% vs G10 over 0-3M - CitiBank

Analysts at Citibank, expected hte US dollar to decline against G10 currencies, by around 1% in a 0-3 month horizon and 4% over 6 to 12 months. 

Key Quotes: 

“The $ can fall when there is positive growth convergence (RoW growth outperforms the US, a la 2017) and negative growth convergence (US and ROW growth falls but RoW growth falls less).”

“In 2015, US growth retreated from 3.8% yoy to 1.3% yoy but Eurozone growth slowed down from 2.0% yoy to 1.8% yoy only. The dollar index fell from 100 to 93 in this period.”

“We expect the differential between US and EA growth to peak in 2Q this year. Growth outperformance may narrow from 2% to 1.8% in Q2 and further reduce to 0.7% in Q4, which may undermine the USD.”

“Our point forecasts show the $ around 1% weaker vs. G10 over 0-3m and around 4% weaker over 6-12m.”