News & Analysis

The loosening in US financial conditions following softer inflation and growth data has been the main story for markets to trade over the course of November. Part of this theme has been the substantial depreciation in the US dollar, specifically against rate-sensitive currencies and currencies with cheap valuations. Now, however, the dollar’s decline is beginning to hit some resistance as positioning starts to normalise across G10 pairs. Traders now await the next US inflation reading, which on December 13th is released just a day before the Fed’s final interest rate decision this year. Signs of core services inflation continuing to moderate in the November data are likely to stimulate a further downturn in the dollar, but given the market’s aggressive reaction since October’s report and analysts’ poor track record in predicting inflation over the past 18 months, we think risks are tilted towards a more robust core reading. For this reason, we have now shifted tactically neutral on the dollar in the near term, and await a shift in structural factors to trigger a secular decline in the dollar. We don’t expect this to materialise fully until Q2 2023.

You can read our December 2022 FX Forecasts report here:




Simon Harvey, Head of FX Analysis

Jay Zhao-Murray, FX Market Analyst

María Marcos, FX Market Analyst


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