Rabobank maintains a supportive outlook for the US Dollar, citing strong safe-haven demand and Fed credibility, though it notes that budget deficit concerns and shifting yield spreads present medium-term risks.
Rabobank argues that diminished fears of political interference at the Fed and demonstrated safe-haven demand (notably at the start of the Gulf war) support the USD, letting it benefit from robust US growth. Offsetting this, the bank flags a slipping 'exorbitant privilege' via changing yield spreads and treasury market stress as a medium-term drag, which caps conviction in the bullish view.
Rabobank analysts report that the US Dollar remains supported by diminished concerns regarding political interference at the Federal Reserve and renewed safe-haven demand. While robust US economic growth provides a tailwind, the bank warns that medium-term risks persist due to the unwieldy US budget deficit and signs of stress within the treasury market.
Rabobank points to fewer fears about political interference at the Fed and renewed safe-haven demand for the dollar, which should let it benefit from strong US growth.
Concerns over the large US budget deficit, signs of stress in the treasury market and changing yield spreads against other bond markets could weigh on the dollar over the medium term.