Investing.com — The greenback is having fun with a three-week win streak and is on observe for its greatest October positive aspects in over a decade, however analysts at BofA imagine the bullish run is ready to expire of steam and have begun to fade the rally.
“We expect the USD rally is working out of steam and have began to fade it,” BofA analysts mentioned in a word on Monday
The , which measures the buck towards a trade-weighted basket of six main currencies, has climbed about 2.5% in October, placing it on observe for its greatest month-to-month efficiency since September 2022, whereas its month-to-date, the greenabck rally is on observe to highest October DXY return in over a decade, BofA added.
The greenback has been driving on a number of bullish elements: Larger U.S. yields; safe-haven flows amid geopolitical tensions; and a comparatively resilient U.S. economic system.
However these drivers are anticipated to expire of street sooner moderately than later, curbing the run within the buck.
“The USD has benefited from increased US yields, protected haven flows, and relative US financial outperformance. Nonetheless, we predict these drivers are dropping steam,” the analysts added.
Beneath the present macro backdrop, nonetheless, not all dollar-related pairs are set for doldrums, BofA suggests, stressing that “choosing the right USD pair to fade is essential as there are nonetheless some remaining bullish USD indicators in place.”
“For this week, we like to carry a bearish view given our out-of-consensus name for a 25bp BoC charge minimize choice,” the analysts added, estimating that short-term USDCAD truthful worth to be on a 1.36-handle with the USDCAD bulls prone to “get squeezed within the state of affairs of a 25bp charge minimize.”
The euro is prone to be one of many large beneficiaries from greenback weak spot in addition to enhancing Eurozone economic system and comparatively hawkish stance from the ECB. The analysts forecast the one forex to strengthen towards the greenback to $1.15 by the tip of 2025.