At Any Rate Global FX: No calm before the storm
Jan 10, 2025
The discussion dives into the dollar's potential for growth amidst US economic resilience and tariff threats. Attention shifts to the UK, where the British pound faces challenges due to economic stagnation and high gilt yields. Political changes in Canada also play a role in currency dynamics, particularly for the CAD. The team examines broader market volatility, exploring how U.S. employment data and interest rate expectations shape the foreign exchange landscape.
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Dollar's Strength
- The US dollar is gaining strength due to US economic resilience and potential tariffs.
- Market focus remains on tariff risks and when US resilience might decline.
Euro and CNH Weakness
- Euro and CNH are expected to weaken further against the dollar.
- A German fiscal response or a Ukraine-Russia ceasefire could pose risks to this outlook.
Term Premium and Dollar
- Rising term premium combined with a hawkish Fed is positive for the dollar.
- The dollar faces challenges if term premium rises while the Fed eases.