According to a research note by the firm
They expect the dollar to strengthen on the back of a resilient US economy and bets for rising interest rates. With regards to trade tensions with China, they expect tariff negotiations to lead to a positive outcome that will allow the US to narrow its trade deficit.
"The dollar will see initial positive reaction to rebounding risk appetite, with US rates expectations lending support", they argue. And moving to trade, they say that "there is too much at stake for all parties involved to allow a broad-based escalation".
Adding that the Trump administration appears averse to stock market volatility while China has little interest in escalating conflict as it "requires stable global growth conditions to continue its balance sheet deleveraging strategy and rebalancing its economy".
Their base case scenario assumes that negotiations will result in an outcome that will narrow the US trade deficit.
They also chipped in a bit on other currencies saying that a recovery in risk sentiment should weaken the yen, swissie, and euro. For the euro, they mentioned that Eurozone data would need to rebound for the currency to appreciate further.
