Traditional levels of summer volatility remained absent in July, with the first part of the month resulting in a sharp sell-off in the broad dollar on softening inflation data only for this to be reversed in the second half of the month on signs of more robust US growth. The bumpy decline in the dollar over the course of the month again confirmed our prevailing view for FX markets this year, as set out in our 2023 macro outlook. With the risk of the Fed hiking once more in Q4 still credible, and the US economy continuing to show signs of exceptionalism, we expect the shallow and bumpy downtrend in the dollar to continue throughout Q3 before improved cyclical optimism and the prospect of Fed rate cuts in 2024 leads to a smoother path lower for the greenback.
You can read our August 2023 FX Forecasts report here:
Simon Harvey, Head of FX Analysis
Jay Zhao-Murray, FX Market Analyst
María Marcos, FX Market Analyst
Nick Rees, FX Market Analyst