MUFG Research discusses the USD outlook and sees a limited scope for further USD strength over the coming months.
"The modest rebound in US yields has seen the Japanese yen underperform most underlining the yield dynamic for FX has come back into focus. The pound also performed poorly with investors unsure over the resolve of the BoE to tighten resulting in spreads moving more favourable for the US dollar," MUFG notes.
"That is likely to prove more dollar supportive but the fact that other central banks are acting more aggressively (BoC; RBNZ; RBA possibly tonight; and the ECB possibly considering +50bp hike in July) means the scale and breadth of dollar strength may now be more limited," MUFG adds.
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