USD has came under increasing pressure over recent months with DXY continuing to reside near two-year lows. The drastic reversal in demand for USD was largely the result of three key factors: the coronavirus, monetary policy and political risk.
However, it's worth noting that political risk has now subsided and the US' coronavirus outlook is improving given its vaccine rollout. Indeed, after peaking on January 8th with 308,013 new daily cases, as of April 5th, the US' 7-day average for new daily cases stands at 63,471.
Given the above, the only persistent bearish factor for USD is the Fed's highly accommodative monetary policy stance as the central bank has made it clear they will look past any near-term rise in inflation and continue their current policy for the foreseeable future.
The Fed's highly accommodative stance and ongoing falling demand for USD as a safe-haven means the fundamental bias for USD remains to the downside, albeit to a lesser degree than at the turn of the year.
However, it's worth noting that political risk has now subsided and the US' coronavirus outlook is improving given its vaccine rollout. Indeed, after peaking on January 8th with 308,013 new daily cases, as of April 5th, the US' 7-day average for new daily cases stands at 63,471.
Given the above, the only persistent bearish factor for USD is the Fed's highly accommodative monetary policy stance as the central bank has made it clear they will look past any near-term rise in inflation and continue their current policy for the foreseeable future.
The Fed's highly accommodative stance and ongoing falling demand for USD as a safe-haven means the fundamental bias for USD remains to the downside, albeit to a lesser degree than at the turn of the year.