US Dollar Faces Weakening Odds Despite Near-Term Balance

Nordea strategists are warning that while near-term risks for the US Dollar are balanced, its medium-term outlook remains negative. They point to recent weaker US data and shifting Fed expectations as factors likely to weigh on the dollar.

The strategists argue that the combination of a steepening yield curve, rising term premium risks, and stretched US asset valuations will outweigh the support from a relatively resilient US economy.

In the near-term, Nordea sees the potential for both appreciation and depreciation of the dollar. However, they maintain their view that the dollar is likely to weaken next year.