Monex’s October 2023 FX Forecasts

Last month we pushed back our expectations for a structural dollar decline beyond 24Q1 while simultaneously uprating our near-term projections, a view based on expectations that the US economy would remain in a much more resilient position than its peers. Having seen this play out through September, we now find ourselves doing so again. On this occasion, a bear steepening in the US yield curve has removed a significant limiting factor for our previous dollar upside call and has resulted in the left-hand side of the dollar smile re-open for the first time this year. In combination with a more hawkish Fed and rising recession concerns, this meant market conditions through September were reminiscent of late-2022, resulting in a more significant rally in the dollar. More broadly, with monetary policy now largely on hold across developed markets, the range of factors for FX markets to consider has also widened. Growth concerns predominate across advanced economies, whilst policy easing is increasingly a focus for emerging market central banks. Commodities exporters, particularly those with exposure to China, could see their currencies outperform if Chinese economic indicators continue to pick up, though this still looks far from certain. In contrast, eurozone adjacent currencies are likely to remain under pressure from the risk of recession in the bloc. Therefore, whilst we still maintain our view that the dollar is likely to depreciate over the longer-term, a broadening in the immediate dollar supportive factors has led us to revise up our near-term USD forecasts for the second consecutive month.  

You can read our October 2023 FX Forecasts report here:

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Authors:

Simon Harvey, Head of FX Analysis

Jay Zhao-Murray, FX Market Analyst

María Marcos, FX Market Analyst

Nick Rees, FX Market Analyst

Disclaimer

This information has been prepared by Monex Europe Limited, an execution-only service provider. The material is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is, or should be considered to be, financial, investment or other advice on which reliance should be placed. No representation or warranty is given as to the accuracy or completeness of this information. No opinion given in the material constitutes a recommendation by Monex Europe Limited or the author that any particular transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research, it is not subject to any prohibition on dealing ahead of the dissemination of investment research and as such is considered to be a marketing communication.