News & analysis

In a week where US inflation notably softened, the dollar still closed 0.8% higher. Nor was the greenback’s surprising resilience solely a function of Fed hawkishness, though the FOMC did catch markets off guard this week by signalling just one rate cut is expected in 2024, boosting the dollar in the process. Some other key factors also underpinned the greenback’s surprise upswing too. On the domestic front, traders are struggling to distinguish between soft and hard landings as the US economy deflates, leaving many hesitant to turn more structurally dollar bearish. Political risk abroad has also come to the fore once again this week, with the announcement of a snap election in France, continued fall out from elections in Mexico and concerns over central bank independence in Brazil all seeing downside pressure on the respective currencies. The BoJ meanwhile managed to disappoint markets once again, triggering a renewed JPY selloff and putting markets back on intervention watch for next week. All told, even a slowing US economy remains an attractive destination for capital against such a backdrop, explaining the dollar’s surprising performance this week and underpinning our longstanding view that it remains too early to turn bearish on the greenback. The week coming up is set to be another busy one too. Monday specifically could see some notable volatility in markets, with traders keeping one eye on the BoJ and the other on political developments. Beyond that, monetary policy will also have its time in the spotlight, with several major central banks holding meetings. Announcements from the BCB, BoE, SNB, RBA and the Norges Bank are just some of the decisions of note, with risks that all five banks could keep rates on hold next week.

You can read the Week Ahead in full here:




Simon Harvey, Head of FX Analysis

María Marcos, FX Market Analyst

Nick Rees, FX Market Analyst


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