Underpriced Dollar Upside

The report highlights a significant disconnect between the US Dollar's current price and its underlying macro fundamentals, suggesting the market is underpricing USD upside. Analysts from BofA and Goldman Sachs point to US economic exceptionalism and potential Fed repricing as catalysts for a breakout.

Key Takeaways

• 1.The market is treating the USD as a weakening story despite strong US data, resilient equities, and sticky inflation.
• 2.Near-term USD upside risks are materially underpriced according to BofA and Goldman Sachs.
• 3.US economic surprises are significantly outperforming the rest of the G10, creating a divergence that should favor the Dollar.

Table of Contents

• Underpriced Dollar Upside
• Nobody believes in the Dollar
• Dollar disconnect
• US exceptionalism
• Fed repricing risk
• The AI distortion
• Grind higher
• Compressed
• The big level
• Cheap convexity

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