The dollar will fall in the middle of the week due to the improvement of the European data and the desire to reduce positions – SocGen

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Concern over the Chinese Covid darkens the atmosphere on Monday, but improving European data and a desire to reduce positions should send the dollar back by mid-weekin the opinion of Kit Juckes, chief global currency strategist at Societe Generale.

China reported its first Covid deaths in months

“My biggest concern is whether the driver of recent (relative) dollar weakness is due to (reasonable) hopes that the pace of Fed rate hikes will slow, hard landings can be avoided and we Heading for a more investment-friendly market scenario in the first half of 2023, or whether market participants are simply looking at year-end position adjustments (cutting dollar longs) and finding a story (soft landing , risk reduction etc) that dovetails with price action I doubt we’ll know much this Monday morning, after China reported its first Covid deaths in months, and talk of reopening dropped in a pothole.”

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“The Chicago Fed index is this afternoon’s standout, but the split between FOMC speakers who push higher for longer versus those who think there are less than 1% more gains will be more interesting in the next few days.”

“Even so, at bottom, there is more room for optimism about the outlook in Europe than in the US and if the dollar gets off to a really good start to the week, that may make room for a slower and less exciting decline in the next few days, especially if we see the PMIs improve on Wednesday.”

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Source: Fx Street

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