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- A more cautious Fed could provide better arguments for further USD strength – Commerzbank
A more cautious Fed could provide better arguments for further USD strength – Commerzbank
The Fed's quick and aggressive hikes might not be the best for the US dollar. In contrast, a more cautious Federal Reserve could provide better arguments for further USD strength, according to economists at Commerzbank.
The Fed will be lowering its key rates again next year
“If the market does not expect a central bank to be able to stick with its restrictive monetary policy for long – as is currently the case in the US – its effect on longer-term interest rate and yield levels has reached its limits.
“As everybody believes that the Fed will be lowering its key rates again next year it makes no sense to hike them exorbitantly in the first place.”
“I think that means for the dollar: an even more aggressive Fed would not be USD-positive. In contrast, a more cautious Fed could provide better arguments for further USD strength.”
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