Professional investors see the dollar sliding even further from last year’s two-decade highs, as the market has underpriced the Federal Reserve’s oncoming easing cycle.
Some 87% of 331 survey respondents expect the Fed to cut interest rates to 3% or below — some significantly so — in a loosening that 40% believe will start this year, according to the latest MLIV Pulse survey. That stands in contrast to market pricing that puts the implied policy rate around 3.05% in two years.
Correspondingly, professional investors are negative on the dollar, with a 17 percentage-point gap between bears and bulls. Many explicitly state that they are bearish because the yield path as priced is too high. Interestingly, the second most popular response is that banking sector stresses will largely be…
