Citi maintains a broad bearish bias on the USD over the medium-term.
"CitiFX Strategy reasserts its medium-term bearish view on USD, driven by global recovery and medical breakthroughs, while real yields remain low in the US," Citi notes.
"As outlined in a new note: – A Biden divided government would imply less forceful US fiscal stimulus, and probably still a change in Fed Chair in 2022.
– The Fed will add more stimulus in response to weaker growth and inflation, likely through more asset purchases.
– The election outcome would weaken but not eliminate the ‘MMT trade’ which combines global reflation with the possibility of USD debasement. But the outlook is still positive for risk assets and bearish USD into 2021 due to i) global recovery and the prospects for vaccines, and ii) the dovish Fed and the risk parity channel," Citi adds.