MUFG Research discusses the USD outlook and adopts a bearish bias in the near-term.
"The Fed continues to be successful in anchoring short-term yields. The reference by Fed Chair Powell on Wednesday that QE tapering would be “well before” a rate hike has helped prompt some further decline in rate expectations at the front-end of the curve. The implied yield on the Dec 2022 fed funds futures contract has declined by 10bps since early April. FX has started to adjust quickly to yield developments in the US," MUFG notes.
"As we indicated last week, we have dropped out bullish view on the US dollar and with US yields consolidating, there is scope for investors pricing a better global outlook that had turned too pessimistic that signals USD downside risks over the short-term," MUFG adds.