US dollar update

USD dollar Summary

For one more week, the US dollar is reaffirming its status as the dominant currency, demonstrating strength against almost every major currency. This resurgence is supported by higher US yields as the US 10-year yield is currently at 4.47%, which is a multi-year high price.

Of course, the most important factor is the latest developments of FOMC. The FOMC has decided to maintain interest rates in the 5.25-5.50% range, as expected. While the median forecast still predicts a 0.25% rate hike by the end of 2023, the 2024 forecast suggests a 0.50% rate cut.

The Summary of Economic Projections, which showcases the macroeconomic predictions made by committee members, displayed a more positive outlook compared to June. In particular, the median forecasts for GDP growth in the current year and 2024 were raised, while projections for the unemployment rate were reduced.

All the above led to a stronger US dollar against almost all other major currencies. As the week closes in, the US dollar index is moving above 105 which is its highest level since the last March. We also saw strong turbulence in the equity markets with SP500 and NASDAQ100 indices, performing important weekly losses.


Market Views & Opinions

The UOB is forecasting that the Federal Reserve will hike interest rates one more time in November 2023 before pausing. They are also expecting the Fed to delay their rate cuts till mid-2024 and to do so at a less aggressive pace than previously forecast.

Danske Bank believes that the US Federal Reserve’s recent actions could lead to a strengthening of the EUR against the USD in the near future. The Bank cites the Fed’s peak policy rates, the improving manufacturing sector relative to the service sector, and/or easing pessimism priced on China as potential drivers of this EUR/USD strength. However, Danske Bank still expects the EUR/USD to be lower in the long run, predicting a rate of 1.03 in 12 months.

The opinion of ING is that the recent rise in US Treasury yields is creating headwinds for riskier assets such as stocks, credit, and emerging markets. They believe that this equity correction is supportive news for the dollar and that the dollar is likely to remain strong in the near future.



The information in this report is of a general nature only. It is not a piece of personal financial advice. It does not take into account your objectives, financial situation, and personal needs.

a-Quant is not responsible for your actions and recommends you contact a licensed financial advisor before acting on any information contained in this general information report.

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