Tentative improvement in risk sentiment leaves US Dollar vulnerable to further weakness – MUFG

The USD continues to trade on a softer footing since banking fears emerged. A tentative improvement in global investor risk sentiment is set to continue undermining the greenback, economists at MUFG Bank report.

Yield spreads have moved against the USD this month

“The US rate market remains much more confident now that the Fed is close to ending their hiking cycle with only 12 bps of further hikes priced in for this year, and then expects around 60 bps of cuts in anticipation that the US economy will slow sharply/fall into recession later this year.”

“The tentative improvement in global investor risk sentiment at the start of this week leaves the US Dollar vulnerable to further weakness on the back of the recent sharp adjustment lower in US yields.”