Soft landing optimism has the dollar on the ropes

In the wake of last week’s solid US payrolls report and this week’s below-expectation CPI data, which have strengthened hopes of a “soft-landing” in the US economy, short-term momentum has swung heavily against the dollar. Although it has rebounded a bit today, the greenback is on track for its worst week since last November and the DXY index has briefly traded below the symbolic 100 level – its weakest since April 2022. The case for a dollar rebound relies increasingly on our view that recessions in the US and other major economies will lead to a renewed deterioration in risk appetite later this year.