USD remains on its backfoot as a cautious Fed - TDS

Research Team at TDS, suggests that the US economic backdrop has softened in recent months, and the weakening in consumer spending momentum suggests that underlying domestic fundamentals have deteriorated.

Key Quotes

“And with the inflation backdrop still week, the case for caution at the Fed remains strong. Nevertheless, with global headwinds abating, the dollar weakening and financial conditions becoming more supportive, the outlook for economic recovery remains favorable.

USD remains on its backfoot as a cautious Fed, soft domestic data and EU referendum risks compel a reduction in USD longs. Remain neutral but a moderate, but very backloaded rebound in Q2, may lie ahead once we pass event risk. For now, emphasis remains on idiosyncratic risks in non-dollar legs.”