Credit Agricole CIB Research discusses the USD liquidity conditions and sees a scope for a tightening conditions by the end of June.
"There is no escaping the pervasive impact of the USD liquidity overhang, which, in our view, remains the main driver of G10 FX markets at present. The US Treasury has been flooding global money markets with the cash equivalent of 12 months’ worth of Fed QE purchases since March. This had significantly reduced the ability of US rates, UST yields and the USD itself to respond to the changing US outlook and mounting market expectations of the changing Fed policy outlook," CACIB notes.
"The liquidity deluge could start easing in late June given that the US Treasury has already unwound most of its excess cash holdings," CACIB adds.