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- USD downtrend to gather momentum from mid-year – Westpac
USD downtrend to gather momentum from mid-year – Westpac
January saw a partial reversal of DXY’s decline, although it remains 9% off its peak. While inflation risks are likely to persist to mid-year, thereafter the US Dollar down-trend will gather momentum and sustain through to end-2024, according to economists at Westpac.
Euro to lead the way
“We remain of the view that the US Dollar will move materially lower than its current level, although likely not for some months. The reason for this is that inflation risks linger in the US and other developed markets; and there remains a view amongst market participants that the country most able to navigate this period is the US, thanks to the strength of their labour market and the FOMC’s willingness to do ‘what it takes’.”
“By the middle of 2023, not only will US disinflation broaden to services, but job creation will throttle back while wage growth continues to slow. The market’s focus from that point on will be growth differentials, with the Euro Area and Canada to outperform the US, and the UK to outperform current expectations of market participants.”
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