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At Any Rate
Global FX: Fed easing and dollar weakness: uneasy bedfellows
Aug 16, 2024
Arindam Sandilya, a global FX strategy expert, joins interest rate strategist Ben Jarman and FX specialist James Nelligan to dive into the intricate relationships between central bank easing cycles and currency values. They unravel the complexities of the dollar's strength against recent economic shifts. The discussion highlights the Reserve Bank of New Zealand's unexpected rate cut and its implications, while also analyzing the dynamics of the Australian dollar amidst global challenges and weak data from China.
17:22
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Quick takeaways
- The recent dollar fluctuations highlight the complex interplay between soft US inflation, strong retail sales, and anticipated Fed cuts.
- The RBNZ's unexpected rate cut poses significant risks for the Kiwi-dollar, with indications of further easing amid economic instability.
Deep dives
The Current FX Market Dynamics
Recent market fluctuations in FX have been influenced by a mix of soft US inflation prints and a surprising rise in retail sales. Initially, the dollar seemed poised to weaken, echoing trends from late 2022, yet strong retail sales data reversed this movement, pushing yields and the dollar back up. Markets are now projecting a modest expectation of Fed cuts, with some analysts anticipating cuts to be confirmed in September. Historical patterns indicate that the dollar may maintain or even increase in value during the year following initial Fed cuts, though this cycle appears uniquely challenged by global economic conditions.
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Discover
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Listen to the best highlights from the podcasts you love and dive into the full episode