USD: Near a transition from strength to weakness - Wells Fargo

According to analysts from Wells Fargo, the US dollar could have some corrective strength over the next months bases on the recently FOMC meeting. They warn that we may be nearing a transition toward weakness on a wider perspective. 

Key Quotes: 

“The dollar has exhibited softness through most of 2017 thus far. Hard data continues to lag much of the sentiment driven data, indicating that the gap between future expectations and the current economic situation may be difficult to close. However, year over year, the U.S. dollar has appreciated against the majority of its major trading partners. Against the British pound and the Chinese renminbi, the dollar has gained 12.3 percent and 5.5 percent, respectively.”

“Our currency strategy team sees enough in the FOMC’s announcement to generate some corrective strength in the U.S. dollar over the next several months, as the Fed is likely to remain more active during other global central banks during this period.”

“Some key central banks have begun to hint at a less dovish global monetary policy stance – most notably the European Central Bank at its policy announcement from early June, while we also note more hawkish comments from the Bank of Canada’s policymakers recently.”

“Global monetary policy may be shifting from “divergence” to a period of monetary policy “convergence.” If this is to be the case, we may also be nearing, or even beginning, a transition from trend U.S. dollar strength to trend U.S. dollar weakness.”