Barclays Research discusses the USD outlook and sees a scope for another 3% rally against its key major counterparts.
Barclays Research discusses the USD outlook and sees a scope for another 3% rally against its key major counterparts.
“In the near term, another COVID flare-up in China, natural
gas shortages in Europe and sticky inflation prints in the US have the
potential to drive the dollar up another 3% against key major
counterparts. To sell the dollar here is to underwrite those risks and it may still be too early for this,” Barclays notes.
Easing of tail risks and policy convergence can help reduce USD
overvaluation one year out. Our economic forecasts envisage moderation
in US activity and inflation, a gradual but steady rebound in Chinese
activity and an ultimate bounce back to European activity after a sharp
slowdown. Therefore, we expect dollar overvaluation to moderate
in the medium run. For reference, we have kept our EUR$ 12m forecast
unchanged at 1.10,” Barclays adds.
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