Overvaluation may limit further strength in the USD

We estimate that, in aggregate, the US dollar has become more overvalued over the past few months. In our view, this is because fundamentals in the US relative to other major economies have not improved to the same extent that the greenback has strengthened against most major currencies over this period. That said, we expect the global economic backdrop to remain favourable for the dollar in the near term, so we doubt that the rally in the greenback is set to reverse just yet.