HSBC on DXY

The USD faces a complicated week ahead with a multitude of forces in play. We believe the risks are tilted towards USD strength. On the geopolitical front, the FX impact of the fractious meeting between US President Trump and Ukraine’s President Zelenskiy has been modest. But uncertainty remains high. Separately, the markets will also have to digest developments around US trade policy with tomorrow’s deadlines looming for Canada, Mexico and China. Then there is the more conventional matter of economic data, with key releases already out this morning from Europe, and potentially market-moving data out of the US through the week in the run-up to Friday’s employment report. We can also throw an ECB rate decision into the FX market mix this week. We discuss each of these elements below, but on balance, we continue to view the risks as asymmetrically skewed to USD upside.