DXY: Bull cycle could extend further if a 2020 US recession is coming – CitiBank

Analysts at Citibank forecast the US Dollar Index at 97.97 in three months, 97.35 in 6-12 months and at 89.26 over the long term. The risks to the outlook come from the possibility of a recession in the US. 

Key Quotes:

“With most major Central Banks in AEs having shifted in a dovish direction throughout 2019, there is unlikely to be enough policy divergence to warrant sustained trends. Instead, in recent months geopolitical shocks have been the catalyst for higher volatility in asset markets in general. The risks may continue to be more USD positive than negative.”

“General tendency to $ appreciation in the first year of recession especially from t+6m, with first year $ gains of about 6-7% on average. If we are heading to a 2020 US recession(not Citi’s base case), then the risks to our medium to longer term views are that this USD bull cycle could extend further.”

“Our forecasts imply that the $ may be around flat vs. G10 over 0-3m and 6-12m and about 10% lower over the long run.”