Sustained further USD gains would require hawkish US data surprises or tangible signs of financial sector frailties but both rates and risk appetite should point to a weaker USD over the near term, in the view of economists at HSBC.

Banking on a weaker USD

“While the USD may continue to enjoy bouts of support when concerns about financial sector frailties are prominent, we believe the bigger picture is likely to drive the USD weaker over the near term.”

“US data generally point to reasonable US economic activity and retreating inflationary pressures, but it would only take an unexpectedly strong US employment report (7 April) or a punchy CPI reading (12 April) to bring back thoughts of a more hawkish Fed.” 

“We think that a test of year-to-date lows on the DXY is likely in the weeks ahead.”