The jump in the Dollar appears overdone. The Federal Reserve sent a rather clear message earlier this week: some resilience in activity data won’t be a barrier to cutting as long as inflation shows downward momentum. We suspect the central bank’s dovish surprises in Switzerland (rate cut) and the UK (less hawkish narrative) have contributed to the strong Dollar momentum.

As things stand, we don’t see the Dollar rally having legs. As the dust settles after a very busy week for global central banks, we suspect markets may scale back long USD positions as the relatively dovish message by the Fed should still resonate. 

Our view is that key March US data, released in the first half of April, can pave the way for a more sustainable Dollar decline.