MUFG Research discusses the USD outlook and sees a scope for further softness in the near-term on the decline in implied yields.
"The implied yield on the December 2022 Fed Fund futures contract has fallen back to 0.24% after hitting a peak of 0.32% at the start of this month. The price action provides some tentative evidence that the Fed’s strong commitment to maintain loose monetary policy could be helping to dampen upward pressure on US yields and the US dollar in the near-term," MUFG notes.
"The Fed’s continued commitment to loose monetary policy remains a key assumption behind our view that it is still too premature to expect a sustained US dollar rally at the current juncture. At the very least, recent price action suggests that markets are now better priced for the improving US economic outlook following the adjustments that took place in Q1,' MUFG adds.