Short-term view from Barclays on the USD, expects the depreciation to continue

  • rebalance away from the USD to continue
  • US election risks "a factor that may not be fully priced by the markets, given the focus on Covid-19 responses and collateral damage"
  • EUR/USD technical break of 1.1500 "should attract longer term names for some time in selling the USD"
  • swap lines the Fed established during the coronavirus crisis have helped to normalize dollar demand, now the world is flooded with USD, add in the effects of the Fed rate cut
  • "Corporates no longer pick up any yield issuing in Europe and swapping back into USD's"
  • compared to 2019 when they picked up almost 300 bps in 1 year by swapping from euros into dollars
  • has resulted in less EUR selling than in the past

via Bloomberg