Bank of America Global Research discusses the USD outlook and highlights upside risks to their USD forecasts. BofA targets EUR/USD at 1.07 by year-end.
"Although the USD has now reached very close to our H1 forecasts, we do not believe the market had a proper reality check yet. We will feel that this is the case only when both bad news and good news are bad news, the former because the Fed will have to keep hiking, the latter because the Fed cannot cut rates for as long as inflation remains high and sticky," BofA notes.
"As we argued in a report this week, both the current no-landing scenario and a hard landing scenario should support the USD, suggesting upside risks to our forecasts. Only a soft landing scenario would be USD negative, This is the market consensus, but we see it as the least likely. For how long the USD strength will last likely will depend on how sticky inflation is going to be," BofA adds.