Monex’s March 2023 FX Forecasts

After one round of US data, markets aggressively shifted their pricing for the Fed to sit in line with the central bank’s December dot plot.  On the whole, higher nominal US rates and increased volatility in fixed-income markets spurred broad dollar strength in February. As we enter the pre-FOMC period in March with key payrolls and CPI data out in the first few weeks, markets are arguably positioned for another strong round of data to take the implied terminal rate higher after they were caught off-guard in February. However, we are more cynical that the data can live up to these expectations, especially after January’s releases were contaminated by one-off distortions such as pandemic effects and re-weightings. We, therefore, look for a reversal in some of February’s price action on the back of reduced upside risk to US rates and potentially reduced volatility within the space. However, our conviction over this base case remains lower than usual. There remains a non-negligible risk that stronger US data forces the Fed to signal an extension to their hiking cycle in the March dot plot. In our view, this would spark non-discriminatory dollar strength, similar to that seen throughout parts of 2022. 

You can read our March 2023 FX Forecasts report here:

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Authors:

Simon Harvey, Head of FX Analysis

Jay Zhao-Murray, FX Market Analyst

María Marcos, FX Market Analyst

Nick Rees, FX Market Analyst

Disclaimer

This information has been prepared by Monex Canada Inc., an execution-only service provider. The material is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is, or should be considered to be, financial, investment or other advice on which reliance should be placed. No representation or warranty is given as to the accuracy or completeness of this information. No opinion given in the material constitutes a recommendation by Monex Canada Inc., or the author that any particular transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research, it is not subject to any prohibition on dealing ahead of the dissemination of investment research and as such is considered to be a marketing communication.