Brown Brothers Harriman's (BBH) Elias Haddad maintains a constructive outlook on the US Dollar Index (DXY), warning that it may overshoot the upper end of its nearly one-year 96.00-100.00 range in the near term due to resilient US economic activity [1]. Haddad emphasizes that the strength of US growth, both in absolute and relative terms, is expected to outweigh any negative impact on the US Dollar stemming from improved risk sentiment related to the Iran conflict [1].
Haddad notes that risk sentiment should remain supported as both sides in the Iran conflict are reportedly working towards a deal to extend the ceasefire by 60 days and reopen the Strait of Hormuz [1]. Despite this potential improvement in geopolitical risk, the focus remains on US economic fundamentals as the primary driver for the Dollar Index [1].
Key upcoming data releases highlighted by BBH include the May Conference Board Consumer Confidence index, with particular attention to the job demand subindexes for signs of labor market stabilization, and the ADP employment change for the week ending May 9, which will also be closely monitored [1].
CONCLUSION
BBH expects the US Dollar Index to potentially break above its recent range highs, driven by strong US economic performance. Market participants are advised to monitor upcoming US confidence and employment data for further direction. Improved Iran-related risk sentiment is seen as secondary to US growth in influencing the Dollar's trajectory.