Bank of America Global Research maintains a core bullish USD bias but argues caution in the near-term.
"Although we remain constructive on the USD post-FOMC, we would also urge for caution as we still see too many moving parts. We would not expect the USD path to be smooth. Data can be volatile given strong base effects. Inflation in particular will start coming down after the base effects are behind and could take few more months to have a better picture of the extent to which some inflation may be more persistent," BofA notes.
"The Fed policy normalization will be very slow and the overall policy stance will remain very loose during the process. European data is also now improving during the reopening. Summer seasonality is good for the EUR, although this depends on the summer season which remains subject to risks as long as the pandemic is not over. The ECB Strategy Review this September is another important known unknown, and as we have been arguing, it could go either way for the EUR," BofA adds.