MUFG Research discusses the USD outlook and maintains a structural bearish bias through the year. MUFG current DXY-related currency forecasts imply a 6.3% dollar depreciation this year.
“With the 2018 USD cyclical support as good as it gets, we are forecasting dollar depreciation this year as pronounced divergence turns to modest convergence. The significant tightening of financial market conditions and the delayed impact in the US to President Trump’s trade policies are set to result in a notable slowing in economic growth that prompts a pause in tightening by the FOMC at least until mid-year with risks of an even longer pause,” MUFG argues.
“Hence, we see a less favourable backdrop for the dollar this year and are forecasting a reversal of the 2018 gain and some more. Our current DXY-related currency forecasts imply a 6.3% dollar depreciation this year,” MUFG adds.