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Foreign Exchange Outlook
The new year has started off with the US dollar (USD) recovering somewhat from its late 2023 sell-off. The USD’s strong start to the year reflects a number of short-term factors. Firstly, markets had become overly aggressive in pricing in Fed rate cuts for early 2024 and some repricing of market expectations, prompted by resilient economic data, has lifted US yields significantly from the levels seen late last year. Secondly, and as a consequence of markets mispricing near-term Fed risks, market positioning had become overly USD-bearish, and some rebalancing followed the adjustment higher in US yields. A third ... (full story)