Dollar Index

The US dollar has had a decent day so far today, especially against the Japanese yen. But it was higher event against the commodity dollars despite a sharp improvement in risk appetite.

If Japan’s bond implosion leads to a liquidation of US assets, then global investors may be in for a rude awakening. Against this backdrop, the US dollar forecast is bearish, with the USD/JPY in particular at risk of a bigger decline, possibly sub-140.00.

Traders were too busy reversing the “Sell America” narrative to pay attention to weak US data today. Buoyed by renewed optimism around potential trade deals between the US and major partners, the dollar has made a small recovery in recent days. While it is too soon to declare and end to the existing bearish dollar forecast, could this be the early stages of a broader dollar rebound?

The US dollar forecast remains modestly bearish following last week’s big drop, driven largely by the rallying EUR/USD pair on the back of the Germany’s big spending plans.

The combination of uncertain growth prospects in the US and the possibility of large fiscal stimulus in Europe has had a predictably bearish impact on the US Dollar Index (DXY).

Friday's data showing strong wages growth and hot inflation expectations, and ongoing expectations of inflationary policies under Donald Trump, means the Fed is likely to remain on pause for a long time. Against this backdrop, the US dollar forecast remains bullish.

FX investors are looking forward to the release of US nonfarm payrolls report, due tomorrow, which should impact the near-term dollar forecast.

NFP leading indicators point to a potentially above-expectation reading in Friday's jobs report - see what it might mean for the US Dollar!

The US dollar forecast remains modestly bullish in our view, because of Trump’s inflationary policies. The fact that it has weakened a little in recent days is more of a reflection of the relief rally that some currencies like the euro have enjoyed.

While one can argue the greenback has made a short-term peak, the overall dollar forecast remains positive, especially against currencies subject to increased tariff risks from Trump’s administration.

Traders are pricing in roughly a 1-in-10 chance that the Fed leaves interest rates unchanged at its November, but it may take 4 more better-than-expected US economic reports in a row.