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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Quick takeaways
- The U.S. dollar's bullish outlook is supported by strong economic data and cautious Federal Reserve rate cut expectations amid tariff risks.
- The UK faces a challenging economic outlook for GBP due to stagnation concerns and rising gilt yields not translating into currency strength.
Deep dives
U.S. Economic Resilience and Dollar Strength
The recent strength in the U.S. economy is reflected in rising yields and optimistic payroll data, contributing to a bullish outlook for the dollar. Market participants have started to adjust their expectations, now anticipating only a limited number of rate cuts by the Federal Reserve over the next two years. The implications of potential tariffs are looming, but current resilience in U.S. data suggests that any negative impacts may not be immediately felt. However, analysts are cautious about how long this strength can be maintained, as a decline could pose risks to the dollar's strength down the line.
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