USD Sell-off Intensifies Despite Strong US Jobs Data

What the desk is arguing

MUFG's analysis highlights a curious divergence in market behavior post strong US jobs data, suggesting that the dollar's depreciation could be a sign of broader shifts in investor sentiment. This unexpected sell-off indicates that the market may be pricing in an imminent pivot by central banks, particularly in terms of interest rate strategies and trade policies, which could further erode the dollar's attractiveness.

The discussion also emphasizes upcoming decisions from the FOMC and Bank of England as critical inflection points that could exacerbate the current volatility in currency pairs. The anticipated outcomes of these meetings may lead to further reassessments of the dollar's value, especially if shifts towards dovish stances materialize. This challenges the usual expectation that stronger economic fundamentals would bolster the dollar.

Where it sits in our coverage

Our consensus target for USD against major currencies is set at 1.075, with a firm spread between 1.04 and 1.12. This aligns with MUFG's perspective of a bearish outlook on the dollar, particularly amid the evolving trade tensions and central bank policies that could disrupt the status quo.

Among other firms, targets also reflect a similar cautious approach: - JPMorgan: Targeting 1.10 with a Mar-26 horizon. - Barclays: Positioned at 1.08 for the same tenor. - Deutsche Bank: Views recent economic indicators as supportive of a 1.09 target.

How other firms see it

While MUFG's views are mainly aligned with the general sentiment of a softer dollar, some firms maintain a contrarian stance. BofA sees a more robust dollar and sets a target of 1.04 for Mar-26, reflecting a belief that any negative pressures on the dollar may be temporary.

Confirmed divergent views come from other institutions that could signal a potential fight against the prevailing bearish sentiment. They include: - Goldman Sachs: Suggests likelihood of dollar stabilization, target 1.06. - Citigroup: Adopts a neutral position with expectations for a moderate recovery, target 1.07.