Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com

A BEARISH OUTLOOK FOR THE US DOLLAR

Morgan Stanley and TD Securities are both sticking with their bearish calls on the U.S. dollar, though they arrive at the same conclusion from slightly different angles.

Morgan Stanley analysts led by David Adams expect the DXY .DXY — an index that tracks the dollar against a basket of major currencies — to fall to 95 by autumn. Three things are driving that view: robust risk appetite, rate compression, and the dollar carrying more risk premium than usual. All three tend to weigh on the currency over time.

TD Securities adds another layer to the argument. Though U.S. economic data has been looking better than Europe and China recently, America is performing more like a middle-of-the-pack economy when compared to the rest of the world. And even that relative strength is nowhere near the dominance the U.S. showed in 2022 and 2023.

The bank analysts led by Howard Du also push back on the idea that the AI boom is a uniquely American story — it's a global tailwind, and markets may be wrong to price it as a dollar-positive theme. Europe and Asia looked weak earlier this year partly because an energy shock hit importers hard, distorting the picture.

The biggest near-term threat to the bearish view remains the Federal Reserve. Hawkish Fed minutes combined with a higher-than-expected core inflation reading have pushed markets to price in a greater chance of rate hikes this year. Higher rates typically strengthen a currency.

Morgan Stanley's counter-argument hinges on the next CPI print on June 10, which they expect to show that April's spike in housing costs was temporary — making a rate hike look less likely.

Until then, a short-term bounce toward 100 to 100.50 is possible, but that would be an opportunity to bet against the dollar, not with it.

(Karen Brettell)

*****

EARLIER ON LIVE MARKETS:

CHINESE DRUG DEALS REROUTE SPENDING; THEY DON'T DISRUPT WESTERN CROS CLICK HERE

THE IMPACT OF WEIGHT LOSS DRUGS ON CONSUMER SPENDING CLICK HERE

TWO-FER TUESDAY: CONSUMER CONFIDENCE SOURS, HOME PRICE GROWTH SAGS CLICK HERE

S&P 500 PUSHES TOWARD NINTH WEEKLY RISE AS AI STOCKS LIFT WALL STREET CLICK HERE

CRUDE TESTS KEY SUPPORT AS GEOPOLITICS AND CHARTS COLLIDE CLICK HERE

WHAT'S DRIVING UK GILTS? CLICK HERE

BEAUTY STOCKS SEE A MIXED REFLECTION IN THE MIRROR CLICK HERE

COULD SPACEX-LED MEGA IPO WAVE REPRICE GROWTH STOCKS? CLICK HERE

SO NEAR, YET SO FAR CLICK HERE

BEFORE THE BELL: UNSURE WHAT TO MAKE OF IT ALL CLICK HERE

PEACE TALKS HIT TURBULENCE CLICK HERE