ANZ Research discusses the USD outlook and notes that the USD has likely peaked around current levels.
"The current USD cycle has likely peaked. The US Federal Reserve may be on track to deliver further rate hikes, but markets are now reassessing how high the fed funds rate will go, in light of the sharp tightening in financial conditions. Growth concerns are rising, with the US equity market discounting a reasonable chance of a recession, even if the yield curve is not," ANZ notes.
"Further eroding the dollar’s appeal is the European Central Bank’s hawkish pivot, which is prepping the market for rate hikes and pushing the EUR higher. The external environment will remain challenging, and risk appetite will be fragile. Any safe haven demand for US Treasuries will likely be offset by foreign outflows from equities, given recent earnings downgrades. The US is running record trade deficits, making the USD vulnerable to any capital flow shortfall," ANZ adds.