TD Research flags a scope for a broad USD rally in the near-term.
"The price action is quiet but major market themes remain intact. It's a tug of war of greater growth divergence (and more economic dispersion) and the global central bank liquidity trade. It's likely markets will continue to blend the two of them, especially as positive vaccine, mobility, and growth news would challenge existing policy measures," TD notes.
"The process itself will trigger a shift in market positioning and valuations that reflect the old state, while what comes next is largely unknown. We believe that the USD short purge would reflect a state that matches US exceptionalism, where the broad USD rallies in the next four to six weeks...The winners and losers will reflect growth expectations, policy normalization, and other traditional drivers, offering up a mixed picture for the USD if we get the initial positioning squeeze," TD adds.