USD: 3 Reasons Why Pullback Will Likley Be Short-Lived – Credit Agricole

Mar 16, 2017 at 12:22 PM EDT

The US dollar has been on the back foot since the Fed’s dovish hike but the team at CA sees a pullback and lists three reasons.

The US dollar has been on the back foot since the Fed’s dovish hike but the team at CA sees a pullback and lists three reasons:

Here is their view, courtesy of eFXnews:

Credit Agricole CIB Research argues that the Fed’s message from its March meeting actually comprised a pretty optimistic view on the market but without interpreting into any significant upgrade to projections.

As such, CACIB expects the USD pullback to be comparatively short-lived. CACIB outlines the following 3 reasons behind this view.

1- FX markets happen to be lagging rates with the USD trading at levels below the ones that could be warranted by rate differentials.

2- Rates markets are still under-pricing the 2018 and in particular 2019 dots.

3- The USD is now comfortably the third highest yielder in the G10 implying that running USD shorts is expensive at current levels.

USD Index is trading circa 100.41 as of writing.

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