Long-run outlook for the USD remains challenged by narrowing rate differentials – Scotiabank
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The USD is narrowly mixed and may continue to range trade in the short run. But the greenback is set to weaken in the long run, Shaun Osborne, Chief FX Strategist at Scotiabank, reports.
“It looks a bit of a toss-up about how equity hedge rebalancing flows might shake out at the end of the week and markets will likely remain subject to short-term bouts of uncertainty. Regardless of short-term haven demand or rebalancing flows, the longer-run outlook for the USD remains challenged by narrowing rate differentials.”
“Credit tightening will slow business investment and growth and I still think there is a risk that inflation starts to fall more obviously in the next month or two. The Fed might have one more hike in it but it’s not at all clear that there is another 75 bps of tightening ahead.”
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