USD has room to rise in 2016

There is still a widespread view that USD rallies ahead of the first Fed hike and sells off after. While this holds on average, the degree of dispersion suggests it would be unwise to rely on it. 

"It depends much more on the path of policy relative to expectations and our US rates team look for 125bps of hikes by end-2016 while markets are priced for 75bps over that timeframe. USD looks positive through the turn of the year, particularly against JPY. The US is far better placed than most other countries to shoulder currency appreciation", says Bank of America. 

Global demand is far more important driver for US export growth than the level of USD. And because much of global trade is denominated in USD, the US sees lower exchange rate pass-through than other countries. That means both on the growth and the inflation front, USD has room to rise.