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MNI Global Macro Outlook - May 2022: USD Breakout Implications

The US dollar is breaking higher against key global counterparts, including the Euro and yen. MNI looks at the potential for further USD gains and the associated macroeconomic implications; as well what could derail further dollar appreciation.

For full PDF publication:

USD Breakout Implications - May 2022.pdf

Executive Summary:

  • The Federal Reserve wants to tighten financial conditions - implicitly endorsing a stronger US dollar.
  • The DXY dollar index is on the cusp of breaking through significant chart resistance, having already broken out to multi-year / decade highs vs key currencies such as the Euro and yen.
  • Fundamentals point to further USD gain potential, but despite this, market sentiment isn't particularly dollar bullish.
  • A stronger USD could further weigh on US and global financial conditions, helping achieve disinflation but at the cost of growth.
  • This slide deck is excerpted from our most recent Global Macro Outlook - the previous edition highlighted nascent breakouts for the USD and why the US is “different” in this macro cycle vs its peers.
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