Significant risk of a near-term bounce in USD over the next month – Standard Chartered
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Economists at Standard Chartered expect a near-term bounce in the US Dollar over the next month as the Fed continues to tighten.
“While technicals are not yet at extremely oversold levels, USD has declined nearly 9% since its recent peak in late 2022. History suggests markets or currencies rarely witness such large moves without being followed by a period of consolidation.”
“Over the next 1-3 months, we expect US government bond yields to rise towards 4% as we expect another 75 bps of Fed rate hikes in H1 23, which should be supportive for the USD.”
“China’s rapid reopening could lead to a slower-than-forecast decline in inflation. This could lead to a market reassessment of current expectations of a relatively rapid Fed easing in 2023, which could drive flows into the safe-haven USD, at least temporarily.”
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