Brown Brothers Harriman’s (BBH) Elias Haddad notes that the Dollar has given back all its war-related gains, with recent weakness seen as overdone. Haddad expects the Dollar Index (DXY) to stay in a 96.00–100.00 range over the next few months, while maintaining a structurally bearish USD view due to US policy credibility and Fed politicization concerns.

DXY seen capped in defined range

"USD undershoot looks stretched in the near-term for two reasons. First, stabilizing US labor market conditions will keep odds of Fed funds rate hike in play. In the three months to April, ADP private payrolls increased by an average of 79k each month."

"Second, foreign demand for US long-term securities (treasury bonds & notes, corporate bonds, equities, gov’t agency bonds) remains strong. In the twelve months to February, foreign investors accumulated $1615bn of long-term US securities."

"We continue to expect the dollar index (DXY) to remain anchored within a 96.00-100.00 range in the next few months. Structurally, we are still bearish USD because of fading confidence in US trade and security policy, worsening US fiscal credibility, and the ongoing politicization of the Fed."

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