The dollar is likely to keep rallying until the current slowdown in the global economy is over and growth starts to accelerate again, according to Citigroup Global Markets Inc, per Bloomberg.
“Until then, the US currency is the ‘safest place to hide,’ particularly as it offers a yield premium over its global peers,” Bloomberg quotes a note prepared by Citi strategists, including Jamie Fahy in London.
What we think is needed for a dollar top is a bottom in global growth.
There needs to be a narrative shift in order to change the trajectory of the dollar.
Even a decision by the Fed to slow rate hikes may not be enough to convince the majority of investors to sell the dollar.
An improvement in the global growth outlook remains key as this has been the main driver of the dollar’s past reversals, particularly in the last two decades.
The top in the USD probably only arrives when the Fed is cutting and global growth ex-US is bottoming.
Also read: US Dollar Index pares recent losses around mid-112.00s ahead of US consumer-centric data