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US exceptionalism will continue into 2024, leaving Fed cuts as the strongest argument for USD downside

But economic divergence is feeding into central bank policy, making it harder to get USD weakness.

MRB: Distinguishing Between Winners And Losers

It’s key to distinguish between differing impacts from U.S. dollar strength as higher interest rates will not affect all currencies in the same way.

Balance of risks still points to the euro regaining strength versus the U.S. dollar and continuing to appreciate versus its weak link counterparts. Stay overweight.

Macro Risk Advisors: The Petrodollar

MRA say the US dollar is now effectively the petrodollar. Given it is now the swing producer, rising energy prices lead to a stronger US dollar.

The point of this short 5 min video explainer, is that while investors may fear that rising energy prices could be inflationary, MRA say this ignores the the second-order effects, as a result of the US running large goods deficits, and energy surpluses, among other things.

Deutsche Bank: Hard to make a case for a weaker USD amid China’s economic weakness

We’ve lost count of the number of times Saravelos has got his Euro call wrong. At least he keeps trying.

He says the dollar strength is down to dramatic widening in relative global growth expectations in favour of the US. This, in turn, is reflected in rate differentials, asset price performance and FX all moving in favour of the USD.

Where to from here? On a forward-looking basis there is reason to argue that the widening in US – European growth expectations is peaking

The biggest challenge to a bearish dollar move however is China where the greenshoots are harder to come by and the CNY depreciation pressure intense.

Taking it all in, he’s bringing down his year-end EUR/USD forecast to 1.10 but with low conviction and high uncertainty making our tactical trading view neutral.

Bank of America: Navigating FX by the R-stars

The USD has rallied notably over recent weeks, occurring amid rising real rate differentials and proxies for the neutral rate

We view the market pricing of 2024 Fed cuts as excessive relative to the G10, offering scope for possible further USD support.

TD Securities: The USD: A King, A Prince or A Pauper?

While TD’s signals are currently biased in favor of the USD, they’re suspicious about the durability of the King’s return.

The strength of MRSI’s long signal has waned, while their short-term valuation and positioning models look stretched.

Data dependence also remains the law of the land. The USD is closely watching “hard” data surprises, while they’re looking for a >1-sigma miss in the retail sales control group this week.

Westpac: Strong USD now, 10% depreciation by end of 2024 (see page 12-13)

Absent recession, the FOMC is likely to ease slowly

In time this should still see the US dollar fall materially

From its very weak starting point, Yen is likely to appreciate the most.

MUFG Bank: G10 FX momentum

This is more of an analysis on the bank’s FX momentum models, but it’s useful for what the signals are currently tell us on the direction of travel for the dollar. Short Yen being the major trade.