Credit Agricole CIB Research discusses the USD outlook and maintains a bearish bias into the US November elections.
"The USD should remain vulnerable given the risks to the US growth outlook from the Covid-19 pandemic and the potential prospect for less business-friendly policies if the Democrats gain control over the Presidency and the Congress after the November elections. This could force the Fed to adopt even more dovish forward guidance and even consider using Yield Curve Control, which, in turn, could encourage further diversification out of the USD and into other liquid proxies like the EUR,"
The biggest risk to the above view remains potential preservation of the status quo, eg, a re-election of President Trump and the GOP remaining in charge of the Senate after the vote. This outcome could lead to further fiscal expansion and aggressive protectionism, which have historically been important positives for the USD," CACIB notes.
"In addition, the USD remains the ultimate safe haven and could benefit if the risks to the post-Covid-19 recovery materialise, eg, a global second wave of the pandemic or escalation of geopolitical risks," CACIB adds.