The USD is in steep free fall in the wake of the latest "positive" inflation report. We have been advocating USD shorts since the positioning-induced rally in May and think the recent price action is just the start of a broader bearish turn in H2.

We assess some medium term drivers like global growth and yield curve dynamics, front-end rate momentum and relative central bank policy, and volatility and valuation mechanics. The bulk of these drivers lean against the USD, underpinning our updated outlook that the USD has much room to fall through H2 and even through most of 2024.