December 4, 2022

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US dollar: Citi, global growth will end the rush

The US dollar paused for the second half of the week. The dollar index is up 18% since the beginning of the year, the indicator that measures the direction of the US currency against a basket of the world’s major currencies, today by 0.3%. Several factors contribute to the slowdown of the US currency in the third session of weakness.

Let’s start with US inflation data. Figures released by the US Bureau of Labor Statistics yesterday showed a monthly rise of 0.4%, double the previous figure, while the annual figure fell less than expected to 8.2%. However, the market may have already priced in this scenario, so the jump recorded after these numbers went viral was soon absorbed.

secondly , probability to be British government dramatically adjusts tax cut plan It allowed the pound to move back above $1.13. Yesterday, Chancellor Kwasi Karting prematurely returned from Washington, where an IMF meeting was underway, to discuss changes to the package with Prime Minister Liz Truss. According to some rumors, with the end of the Bank of England’s bond market support, which expires today, the program could be redesigned.

Finally there is the possibility of a file New intervention by the Japanese authorities to counteract the weakness of the yen. With the USD/JPY pair hovering above 147, Japanese Finance Minister Shunichi Suzuki reiterated the government’s readiness to take “appropriate action” against excessive volatility in the currency.

The US dollar: a rise linked to global growth

With the Federal Reserve never missing an opportunity to repeat its aggression, the dollar’s rally is unlikely to stop. The minutes of the meeting published on Wednesday 12 October leave little doubt about the intentions of the US central bank, which spoke of further tightening in monetary policy. The strong employment data last week and especially yesterday’s inflation data fully supports the Fed’s intent.

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“A rally in the US dollar is likely to come only when the Federal Reserve cuts interest rates and global growth outside the US bottoms out,” Citigroup strategists wrote in a research note. According to experts, the dollar’s rise is likely to continue even The current slowdown in the global economy will not end.

In this regard, for analysts, the central bank’s decision to slow the pace of rises will not be enough to stimulate dollar sales. Citi states that dollar reversals over the past two decades have occurred primarily when overall growth forecasts have improved. So, until that happens, “The US dollar is the best place to go”The investment bank stressed.