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PU: Citi: 6% US Dollar Upside Forecast
The currency markets remain without direction and there is little by way of trends to be found in the short-term.
What has caught analyst attention of late has been the inability of the US Dollar to rally, despite data prints confirming the US economy to be in rude health.
Expect the short-term to deliver more of the same argue analysts at the world’s largest foreign exchange dealer, Citibank.
Citi cite insufficient hawkishness at the US Federal Reserve and the US Dollar being previously overbought by investors as reason for the currency’s lacklustre display.
“USD may consolidate in the short-term,” say Citi in a note to clients dated Monday, February 20.
However, in the medium- and long-term, increasing fiscal policy and hike rates by the Fed may underpin USD argue analysts.
Two Reasons to be Bullish on the US Dollar:
Increasing fiscal spending: Trump advocates increasing fiscal spending and infrastructure and tax cuts, which may underpin US and global economy. It may make the Fed tighten monetary policy more quickly, which may support USD.
Fund inflows into the US: US corporations have around $1.2 trillion overseas. If Trump cuts corporate tax, fund inflows back into the US may underpin USD.
USD may have 6% upside against major currencies for the coming 6-12 months.