The USD is trading generally softer so far today after four consecutive daily gains that have taken the DXY index to test its 200-DMA. That benchmark is holding for a third consecutive day and a lower closer on the session today would give the charts an obviously more negative look.

Resilient growth in the US is overshadowed somewhat by still simmering inflation pressures in Europe. That tilts risks toward rates remaining high in the US but going higher in Europe in the coming months. That may mean extended headwinds for risk assets (potentially USD-supportive) but some narrowing in spreads (potentially USD-negative). 

Our forecast anticipates some broader softening in the USD through H2 as the US policy cycle peaks and markets look ahead to the start of the rate cuts but the next few weeks may reflect choppy range trading amid competing drivers for the USD. Note correlations show Dollar/Europe (EUR/USD, GBP/USD, USD/CHF) is heavily influenced by short-term rate differentials currently.