© Reuters
The US dollar is expected to maintain its strength until the end of 2023, despite the traditional weakness in the November-December period. This strength is driven by the United States’ excellent macroeconomic performance and a hawkish Federal Reserve. High US rates, described as downside risk events, are positively influencing the dollar while negatively affecting pro-cyclical currencies in Europe and Asia.
Despite these trends, weaker US macroeconomic data could weaken the dollar. However, significant changes are considered unlikely due to growth reratings in China or Europe. In particular, high US rates causing disruption in the financial sector could result in a brief rise in the value of the dollar due to tightening financing conditions.
Forecasts for the end of the year anticipate the exchange rate around 1.05/1.06 and approaching 150. However, these predictions are not without important threats. A looming recession in the eurozone struggles to revive the Stability and Growth Pact, and potential geopolitical disruptions leading to a rise in oil prices could impact EUR/USD’s expected rise to 1.10 next summer and 1.15 by the end of 2024.
The US economy is expected to slow in the next quarter, which could lead to revised monetary predictions. As we move into 2024, the short end of the US economic curve is expected to decline ahead of the Fed’s planned easing next summer. This could cause the dollar to depreciate, but it is unlikely to give up its gains before the end of this year.
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