Credit Agricole CIB Research flags a scope for USD strength on the back of less ample USD liquidity.
"We think that the times of generous USD liquidity supply maybe soon be drawing to an end. Indeed, the US Treasury is almost done drawing down its TGA after having transferred more than USD1trn of liquidity to the US banks. While the Fed is expected to continue to purchase UST to the tune of USD120bn per month, we believe that the USD could soon benefit from a recovery in the US money market rates and even UST yields," CACIB notes.
"The USD could further benefit if a potential tightening of the US and global financial conditions undermines risk sentiment and thus burnishes the safe-haven appeal of the USD," CACIB adds.