USD Outlook

The fundamental outlook shaping the trading patterns of major currencies remains unchanged. The current consolidation phase will likely be challenged in the near term and the strengthening of the US dollar (USD) will resume despite temporary pullback dynamics.

The USD is expected to return to its strengthening trend, but the pace of appreciation will be slower than recently witnessed.

"Higher short-term interest rates remain our base case scenario, yet the timing of the first move by the Federal Reserve (Fed) has been reassessed. We anticipate that the US economy will regain its accelerating pace in the second quarter of the year on the back of solid employment and persistently accommodative monetary conditions", said Scotiabank in a report on Wednesday. 

The USD entered a range bound environment in mid-March, as market participants digested a later start to the Fed interest rate hiking cycle and an improving economic profile for Europe.