Today’s release of weaker-than-expected US PCE data for August led investors to revise down slightly their expectations for the fed funds rate, and the DXY index slipped as a result. This, alongside an upside revision to US economic growth, leaves us more confident in our forecast for a weaker dollar. Indeed, with lower risks of a rebound in inflation or of a US recession, the case for a soft landing is even stronger. And robust risk appetite coupled with little upside risks to US policy rates suggest to us that the dollar will weaken a bit over the next year or so.
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