MUFG Research discusses the USD outlook in light of the positive outcome of the G20 Summit over the weekend.
"After touching 3-month lows last week of 95.843 the dollar has bounced back to break above the 96.500 level. The positive outcome from the G20 Summit has modestly pared back US rates market pricing for cuts this year. While a July cut is still fully priced in, the distribution of expectations has shifted slightly to the less dovish side.
This highlights the recent dynamic between the US dollar, Fed, and trade tensions – as tensions have eased, market expectations for Fed dovishness have followed suit and the dollar is trading higher on the back of this," MUFG notes.
"However, we expect this boost to the dollar is likely to be short lived as various obstacles remain on the trade front and the Fed easing in July remains a done deal," MUFG adds.