Analysts at Wells Fargo, expect a stable US dollar in the near-term, ahead of renewed softness over time. They see in the long-term fundamentals pointing to a weaker dollar amid international growth and a patient Federal Reserve. 

Key Quotes: 

“The longer-term fundamental (global growth catch up and relative monetary policy trends) remains consistent with a weaker greenback, in our view. However, we had previously anticipated a period of near-term U.S. dollar strength before that greenback softness emerged. In our opinion, recent developments including relative economic and monetary policy trends, and low FX volatility, make that near-term U.S. currency strength seem less likely. Instead, we now lean toward a brief period of U.S. dollar stability before U.S. dollar softness resumes.”

“We expect a stable U.S. dollar in the near term, ahead of renewed U.S. dollar softness over time. While economic fundamentals remain sturdy, including strong household incomes and spending along with fiscal support, the growth upswing appears to have taken at least a brief pause in early Q2.”

“Over the longer term, fundamentals still suggest U.S. dollar softness as international growth strengthens and with the Fed likely to be more patient than some global central banks in tightening monetary policy. Should the global economy continue to recover from the COVID crisis and financial markets improve, that should also weigh on the safe-haven U.S. dollar.”

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