News & Analysis

The US dollar followed our expectations and broadly depreciated for much of Q2, until the June Federal Reserve meeting. At this point, the committee’s reinterpretation of the Average Inflation Targeting framework meant the median dot plot was revised upwards to suggest 2 rate hikes in 2023 would be necessary as opposed to zero hikes previously. Despite the consensus view among the Fed becoming incrementally more hawkish, many of the structural forces behind our Q2 dollar depreciation call remain in play. For this reason, we have maintained our view of a mild depreciation in the broad dollar over the coming 12-month period, but single out currencies that are likely to buck this broad trend as they are exposed to rising US real yields over this horizon.

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Authors: 
Simon Harvey, Senior FX Market Analyst
Ima Sammani, FX Market Analyst

 

 

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