Citi expressed a perspective that expects further weakening of the US dollar in the near term, despite maintaining a bullish stance on the currency over the next one to two months. The brokerage firm emphasized that this outlook is not favorable for a broad strengthening of the dollar, as current market conditions indicate that safe haven currencies such as the Japanese yen could outperform, albeit with unattractive risk/reward for long yen positions .
Citi’s analysis shows that high-beta currencies are likely to experience a bigger decline against the dollar in the coming weeks. The company’s comments indicate a cautious stance towards the euro, indicating that conditions are not favorable for the European currency. According to Citi, the global manufacturing slowdown is expected to have a more pronounced impact on regions outside the United States.
Citi’s comment also touches on the monetary policy of the European Central Bank (ECB), which is driven by a single mandate. Citi believes that this approach could lead to the ECB lagging in its response to economic conditions. However, the company also notes new signals that the ECB is becoming more concerned about growth, which could have consequences for the currency market.
Citi’s view on the US dollar and other currencies comes in a complex global economic environment, in which central banks are balancing inflationary pressures and the need to support growth. The company’s view suggests that investors may need to brace for continued volatility and dispersion in the performance of different currencies.
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