USD to remain supported as market starts pricing a stagflation scenario – BofA

Economists at the Bank of America Global Research maintain a bullish USD bias through the summer. They note that risk sentiment is the latest driver for the greenback.

The correlation of the USD with risk sentiment has returned

"So far this month, risk sentiment has taken over as the main USD driver, with risk-off leading to both lower yields and a stronger USD, with the exception against JPY and CHF, the other safe-haven G10 currencies.”

“As the market starts pricing a stagflation scenario, the outlook for risk assets remains challenging, which is likely to keep supporting the USD."