Fading the USD Vibe-Cession

Despite strong US economic data and stock market performance, the USD remains flat YTD, creating what BofA terms a 'vibe-cession.' They see near-term upside for the greenback, particularly against the GBP and CAD.

Key Takeaways

• 1.The US Dollar Index (DXY) is unchanged year-to-date, suggesting a 'vibe-cession' where sentiment is significantly lower than economic fundamentals would suggest.
• 2.USD sentiment is currently decoupled from strong US economic data, equity outperformance, and relative interest rate differentials.
• 3.BofA recommends long USD positions against GBP and CAD as a way to express a view on underpriced upside risks.

Table of Contents

• Facts vs. feelings: Measuring USD sentiment
• Where is the soft USD sentiment most glaring?
• So has this translated to relative interest rates?
• What role do equities play in assessing USD sentiment?
• Cross-asset comparisons aside, how is the market positioned?
• Bottom Line

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