CIBC Research maintains a bullish bias on the USD over the coming weeks but looks for the USD to peak into the end of Q3. CIBC targets the USD Index (DXY) at 103.8 by end of Q2 and at 103.3 by end of Q3.
"Looking ahead, the USD will likely remain on solid ground in the coming months. That’s primarily because there doesn’t appear to be any let-up in the way longend rates are moving, and the macro liquidity picture continues to point to a ‘risk off’ backdrop. The Fed is already quite hawkish, and the USD will find support against other currencies where policy settings are slower to adapt, or are outright divergent," CIBC notes.
"Still, beyond the next few months, there’s enough baked into the USD to preclude a sustained rally from here. Indeed, we still envisage that markets will reassess where the terminal interest rate for the Fed is being priced which should leave the USD on the defensive a bit as other majors play catch up," CIBC adds.