With a couple of exceptions, currency markets have had a quiet week; the US dollar is ending the week a touch weaker against most other currencies, but in aggregate it remains close to its strongest level for the year. With US bond yields continuing to rise and expectations for Fed rate hikes in the second half of next year solidifying, we think the dollar will remain strong over the coming months. The upcoming week kicks off the next round of central bank policy announcements, with the ECB and the BoJ (neither of which we think will alter their policy settings), as well as the Bank of Canada, (which we expect to signal the end of its balance sheet expansion). To the extent that next week reinforces the widely held view (which we share) that the ECB and BoJ will remain well behind other central banks in normalising policy, it may add to downward pressure on the yen and euro.
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