US rates peaking at 6% would support the Dollar – SocGen

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By and large, this week in FX markets is an exercise in unwinding some of the post-NFP Dollar strength. What happens to the Dollar if US rates peak at 6%? Kit Juckes, Chief Global FX Strategist at Société Générale, thinks that would support the greenback.

“The discussions I’ve been having with clients definitely turned towards the possibility and implications of the Fed going well beyond the 5-5.25% peak everyone has been forecasting.”

“What would 6% do? Glancing at the Bloomberg economists’ survey there are quite a few banks that think we’ll be at 5.25% well into 2024, but no one has yet put down a 5.5% peak, let alone something higher. The obvious answer is that a 5.5% peak, instead of 5.25%, means little, but 6% increases the risk of the cycle ending messily. And that would support the Dollar and be bad for risk-sensitive currencies everywhere.”

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