Forex markets have entered a consolidation phase. This has allowed the dollar to correct 3-4% downwards. However, economists at ING still think it’s too early to talk about a major dollar turnaround.
When will asset markets change?
“Over the next two months, the direction of US real yields is still to the upside. A 2.00% level in the US 10-year real yield is entirely possible as the Fed leads the way.” policy rate towards 5.00%, dragging long-term yields with it. This should keep the dollar strong across the board.”
“The turn in global bond markets it should provide the first real opportunity to put money back to work in asset markets, potentially at the expense of the dollar. Nevertheless, our base case is that this will not happen until early 2023. Before that, we see that EUR/USD will remain under pressure this winter. Levels below 0.95 are possible“.
“Japan’s campaign to curb USD/JPY advance should not prevent further forays above 150. And the GBP/USD can easily trade below 1.10 levels as tight fiscal policy and looser monetary policy prevail in a still difficult external environment.”
Source: Fx Street