The US Dollar (via the DXY Index) did not have a good month of May, despite favorable seasonality conditions otherwise. The ongoing erosion of US real yields, thanks to rising inflation expectations and stagnant US Treasury yields, proved to be a negative influence on US Dollar price action – like it was for much of 2020. Now coming off of what should have been its best month of the year, the US Dollar remains vulnerable for further downside.
But the best hope for a more significant US Dollar turn around would be if commodity prices are able to pullback while US economic data outperforms, provoking a churn towards higher US nominal yields and lower inflation expectations, would which otherwise lift US real yields.
