The US dollar is still the king of foreign reserve currencies, followed by the euro at a distant second.

On the other hand, many are dismissing the Chinese renminbi as a possible major reserve currency to rival the dollar. Although it is already a reserve currency by itself, it is held at levels much lower than the Japanese yen and the British pound sterling in terms of global holdings.

So why is the renminbi being dismissed? This is mainly because it is managed under a fixed-exchange rate system, so the amount of renminbi in circulation has to be controlled in order to better manage the peg. This simply means that, for the naysayers, there cannot be enough Chinese currency for economies to hold due to the constriction of supply.

However, this argument rings hollow when one considers the fact that the US dollar itself surpassed the British pound sterling as the biggest reserve currency in the previous century at a time when the dollar was still pegged to gold.

Break away from the gold standard

This means that while the dollar was under a peg, it became the dominant currency reserve all the same. It was only in 1971 when the US broke away from the gold standard and the dollar became fiat money, with the US able to simply print more money whenever it needed without having to be constrained by anything. So clearly, having fiat money and printing so much money at will is not a prerequisite to being a dominant reserve currency, as the dollar was before 1971.

So why did the US dollar not lose its status when it was not tied up to the value of gold anymore and the US was printing dollars like mad?

The main reason for that is because there was demand for the dollar per se, initially because there was a real need for US output and, later, because Saudi Arabian oil had to be paid in US dollars (the “petrodollar”).

Real demand

All told, all the printed money by the US could simply flow outside and get stored as reserves for products paid in US dollars because there was a real demand for it.

Now consider China. Currently, it is still considered the world’s manufacturer, and its manufacturing output is sought globally. This means the renminbi has value because it can purchase desirable Chinese output.

Additionally, Saudi Arabian oil can now be purchased in renminbi, making the case for the “petroyuan” and creating more demand for renminbi, as was the case previously with petrodollars. With more countries moving out of US dollars as a result of the moves to diversify currency reserves, the renminbi is a natural candidate to replace whatever the dollar cedes in global reserves.

Likelihood of multipolarity

So, will the renminbi overtake the dollar?

Perhaps this question only matters in a “there can only be one” mindset, that is, if it is not the dollar, then it must be the renminbi, or vice versa. This need not be so. In the days before the absolute dominance of the US dollar, the norm was more of a multipolarity of major reserve currencies.*

Given the rising demand for the renminbi, it can likely take its place alongside the dollar and the euro as leading global currencies, and, if so, this might just be a return to an old normal of multipolarity rather than an overthrow of the US dollar by the renminbi.

* The Rise and Fall of the Dollar, or When did the Dollar replace the Sterling as the Leading International Currency? by Barry Eichengreen and Marc Flandreau (2008)

MARC BAUTISTA, CFA, is Vice President and Head of Research & Business Analytics at Metrobank, in charge of the bank’s macroeconomic, industry, and financial market analysis and research. He loves teaching finance and investments, portfolio management, statistics, financial derivatives, economics, etc. in a university setting. He plays guitar in a rock band and loves learning other languages, especially Spanish, promoting its recovery as a heritage language in the Philippines.

The US dollar saw some relief in May 2023 after back-to-back losing months in March and April. Initially, the dollar was sold off as some Fed members provided dovish rhetoric following the Fed’s policy meeting on May 3.

Price action remained range-bound in the week that followed, supported by a stronger Non-Farm Payroll jobs report (253,000 vs. 185,000 forecast) but also tempered by a cooler Consumer Price Index (CPI) (4.9% vs. 5.0% forecast). Ironically, the dollar continued to strengthen as the US approached its June debt ceiling deadline.

Short-term treasury bills maturing in June were sold off but investors continued to buy longer-term treasury bonds as a defensive play. General weakness among the rest of G10 currencies continued to echo risk-off sentiment in the financial markets.

Rate hikes actions of central banks—or the lack thereof–are affecting currencies across the world.

Warning signs for the yen

Japan’s central bank continues to buy long-term bonds. Link to chart: USD-JPY May 2023.png

The Japanese yen (JPY) continued its depreciation from April, hitting a high of 140.60 on May 26 before closing the month lower at 139.34. Bank of Japan (BOJ) Governor Kazuo Ueda kept the status quo as the central bank continued to buy long-term Japanese Government Bonds (JGB) to direct its ultra-loose monetary policy.

Inflation has also come down from its high of 4.3% in January, despite jumping to 3.5% in April from 3.2% in March. This gives the BOJ little incentive to consider tightening monetary policy and the widening differential between US and Japanese policy rates will contribute to further JPY weakness.

A weakened euro and a stronger pound

Euro is still the biggest loser while the British pound is getting higher.

The euro (EUR) was the biggest loser among the G10, falling by 3.07% to close the month at 1.0689. Hawkish statements from the European Central Bank (ECB) after the April CPI of 7% seem to have fallen on deaf ears as the markets focused on underperforming economic data.

Germany, which contributes 30% of the European Union’s (EU) total Gross Domestic Product (GDP), also slipped into a technical recession after posting quarter-on-quarter GDP growth rates of -0.5% and -0.3% in Q4 2022 and Q1 2023 respectively. Our FX traders are bearish on the EUR/USD on the view that the economic headwinds experienced by Germany is likely a sign of things to come for the whole EU.

Across the English Channel, the pound sterling (GBP) also weakened by -1.06% on stagflation fears, despite United Kingdom (UK) inflation easing to 8.7% in April from 10.1% in March. GBP/USD actually bounced back up from a low of 1.2321 on May 25. Taking a broader look at UK unemployment, the increase from 3.5% to 3.9% seems to represent a return to pre-pandemic levels rather than an indicator of economic slowdown. A stable job market provides more cover the Bank of England (BOE) to continue its hiking cycle, which gives our FX traders confidence that the GBP could still push higher.

Rates still up in Canada, Australia

Only China is expected to ease to support the economy.

The Canadian dollar (CAD) depreciated the least by 0.15% to end at 1.3574. Bank of Canada (BOC) Governor Tiff Macklem, in what was considered a hawkish tilt, stated that it was “far too early” to consider rate cuts. Strong Canada employment (41,400 vs. 20,000 forecast) and sticky April inflation (4.4% vs. 4.1% forecast) provided further basis for the BOC’s view of higher rates for longer.

The Reserve Bank of Australia (RBA) delivered a surprise hike of 25 basis points (bps) to 3.85% after keeping its policy rate at 3.6% since March. Governor Philip Lowe emphasized the need for further monetary policy tightening to get inflation down to its 2% target. Despite this, the Australian dollar (AUD) still depreciated by 1.59% to 0.6503 on underwhelming Chinese economic data and the implied effect on Australia’s metal exports.

On the other hand, the Reserve Bank of New Zealand also hiked rates by 25 bps to 5.5% but announced this to be the terminal rate and that rate cuts will begin in the Q3 2024. New Zealand showed mixed economic data with a stable jobs market and declining retail sales highlighting easing demand pressures. The New Zealand dollar (NZD) fell by 2.57% to a low of 0.6022. The recent announcement of the official terminal rate leaves the currency vulnerable against any further action from other central banks.

Chinese Manufacturing and Services Purchasing Managers’ Index (PMI) and Industrial Production all underperformed against expectations, further proving that China’s post-lockdown recovery will take longer than initially expected.

Markets were quick to place their bets against the offshore yuan (CNH), pushing the USD/CNH rate beyond the 7.00-level for the first time since December 2022. Although the People’s Bank of China (PBOC) tried to intervene at the 7.10-level, markets continued to push the exchange rate to a new year-to-date high of 7.13 before closing the month at 7.1192, 2.75% weaker from where it started.

FX Traders’ Forecasts

The above forecasts are the foreign exchange traders’ personal opinions and may not reflect the official views of the bank.

The recent Federal Open Market Committee (FOMC) meeting resulted in the Fed still pausing rates in June in order to continue monitoring the impact of its monetary policy on the US economy. But this was followed by yearend interest rate projections increasing by 50 bps with similar adjustments to forecasts over the next two years. This puts the US dollar in an awkward position as the Fed anticipates key economic data that could still sway future rate decisions.

Markets will likely turn toward other global central banks to see if they can continue tightening monetary policy relative to the US while also keeping their economies stable.

EARL ANDREW “EA” AGUIRRE  is a Market Strategist at Metrobank’s Financial Markets Sector and has 10 years of experience in foreign exchange, fixed income securities, and derivatives sales. He has a Master’s in Business Administration from the Ateneo Graduate School of Business. His interests include regularly traveling to Japan and learning its language and culture.

April 2023 was a generally weak month for the US dollar as it continued to be battered by a regional banking crisis that started in March with the collapse of Silicon Valley Bank (SVB). The tightening in bank credit conditions that followed had markets wondering whether the crisis was already doing the Federal Reserve’s job for it and if additional rate hikes were still necessary.

These sentiments grew stronger after the March 2023 Consumer Price Index (CPI) came out lower at 5% year-on-year versus 5.2% forecast. By mid-April, better than expected Q1 2023 earnings of the top US banks helped alleviate banking crisis fears and prop up the US dollar.

The currency continued to recover on still-high one-year US inflation expectations of 4.6% versus 3.7% forecast and was barely affected by news of First Republic Bank’s deposit outflows and stock sell off, which eventually led to its closure on May 1.

The Japanese yen (JPY) was the biggest loser in April, starting at 132.46, and then ending higher at 136.30 as the Bank of Japan (BOJ) made no changes to monetary policy at its April meeting. Markets saw the move as a dovish tilt from previous expectations of immediate hawkish changes when Governor Kazuo Ueda’s nomination was announced.

However, it seems that the BOJ is quietly laying the groundwork for a potential future policy shift. A review of past changes in monetary policy was announced at the meeting.

There were also some notable changes in rhetoric such as the removal of the central bank’s previous pledge to keep interest rates at “current or lower levels.”

Despite Q1 2023 Gross Domestic Product (GDP) underperforming at 1.3% versus 1.4% forecast, the Euro fared much better than its G3 counterparts on a combination of improved growth expectations, steadily easing inflation and consistently hawkish European Central Bank (ECB) rhetoric which it still open to rate hikes in 50-basis point (bp) increments.

But the ECB may be in a similar position to the Fed as markets have priced in only 1-2 further hikes in the next two meetings. We also wonder whether the EUR/USD exchange rate already reached its target upside at 1.1100 as overly bullish Euro positions started to take profit at those levels.

Pound sterling (GBP) remained the best performer last month as United Kingdom inflation in March remained in double digit territory at 10.1% versus 9.8% forecast, which highlighted the extended need for the Bank of England (BOE) to keep policy rates elevated.

Wage growth also remained strong as quarterly total average weekly earnings surprised to the upside at 5.9% versus 5.1% forecast. The desk continues to be slightly bullish on GBP/USD exchange rate as the BOE has to remain more hawkish to stamp out inflation while also trying to avoid a technical recession.

Despite initial expectations that an OPEC+ supply cut would cause oil prices to shoot up, prices remained stable in April, which caused the Canadian dollar (CAD) to weaken by as little as 0.18%. The currency pair seems to have established a near term bottom at the 1.3350/1.3400 region, similar to how oil has tapered off its decline at the USD 66-67 per barrel level. Given that the Bank of Canada (BOC) also paused its rate hikes earlier than the Fed, we still see opportunities for the US dollar to strengthen against its Canadian counterpart.

The Australian dollar and New Zealand dollar tracked lower metals prices as both seemed to track the move of copper futures in particular. Pessimistic views on China’s economy and decreasing demand for imported metals further reinforces the bearish views on Australian dollar (AUD) and New Zealand dollar (NZD). AUD was initially pressured by the Reserve Bank of Australia’s (RBA) decision to pause its policy rates at 3.6% but the currency pair was able to recover some losses as Australian Employment Change doubled expectations at 53,000 versus 20,000 forecast.

AUD ended lower by 0.91%. On the other hand, NZD weakened further by 1.34% as Q1 2023 CPI came out much lower at 6.7% year-on-year versus 7.1% forecast. Previously, New Zealand inflation had been stuck at 7.2% for both Q3 and Q4 2022.

Growing weakness in CNH

It has been months since China ended restrictive lockdowns and global markets have yet to see any spikes in significant demand, particularly the aforementioned metals that the country used to import from Australia and New Zealand. The offshore yuan (CNH) did not strengthen at all despite positive data in Q1 2023 GDP (4.5% versus 4% forecast), year-on-year March trade balance (USD 88.19 billion versus USD 39.20 billion forecast), year-to-date industrial production (3% versus 2.7% forecast), and unemployment (5.3% versus 5.5% forecast), as investors expected pre-pandemic-level figures.

To make matters worse, the People’s Bank of China (PBOC) signaled the possibility of rate cuts later in the year in order to further spur growth. This will continue to put pressure against the CNH, which will likely stay above the 7.0000 level.

The above forecasts are the foreign exchange traders’ personal opinions and may not reflect the official views of the bank.

The US dollar continues to be strong against its global peers even after First Republic Bank replaced SVB as the second largest bank closure in US history. Ironically, the risk off sentiment brought about by both the regional banking crisis and debt ceiling only further increased the demand for US treasury bonds as a safe haven investment.

Slight decreases in recent inflation figures also support expectations of high policy rates. The Fed is currently divided on whether to pause or hike rates once more in June but it will probably take signals of future rate cuts to cause the US dollar to weaken significantly.

EARL ANDREW “EA” AGUIRRE  is a Market Strategist at Metrobank’s Financial Markets Sector and has 10 years of experience in foreign exchange, fixed income securities, and derivatives sales. He has a Master’s in Business Administration from the Ateneo Graduate School of Business. His interests include regularly traveling to Japan and learning its language and culture.

March 2023 initially had the US Dollar on a strong start as Federal Reserve Chair Jerome Powell testified before US Congress that inflation figures were still too strong and that policy interest rates had to move higher for longer.

However, this was followed by the closure of Silicon Valley Bank (SVB) and Signature Bank while First Republic teetered on the edge. The banking crisis that started in the US made its way to Switzerland as investors were once again skeptical of Credit Suisse, which had already been struggling over the last two years.

Markets abandoned the US dollar for other safe haven assets such as US treasury bonds, gold, and the Japanese Yen. Even when the US Federal Reserve and Swiss National Bank stepped in to restore confidence in the banking system, a slew of weaker-than-expected US economic data in Producers Price Index (-0.1% vs. 0.3% est.), Retail Sales (-0.4% vs. -0.3% est.), and 4Q 2022 Gross Domestic Product (GDP) (2.6% vs. 2.7% est.) continued to push the dollar to its lowest level year-to-date.

The Japanese yen (JPY) appreciated all the way to 132.86. However, demand for JPY as a safe haven currency has dwindled as markets have started to move past the banking crisis, especially after the top US banks released better-than-expected earnings for the 1st quarter of 2023.

Markets had also expected the new Bank of Japan (BOJ) Governor Kazuo Ueda to initiate discussions on reducing Japan’s ultra-loose monetary policy, but he has instead lowered these expectations in the near term, preferring not to make any sudden changes to policy.

Both the euro (EUR) and British pound (GBP) rallied following SVB’s collapse and were relatively insulated from the Credit Suisse issue after Swiss regulators stepped in and arranged the bank’s sale to its rival UBS.

The European Central Bank (ECB) met market expectations by hiking its three policy rates by 50 basis points (bps). ECB President Christine Lagarde continued to point towards stubbornly high inflation as the main focus, with Germany’s Consumer Price Index (CPI) for February remaining the same as January at 8.7% year-on-year.

The pound sterling was the clear winner last month as the United Kingdom’s (UK) February CPI rebounded to 10.4% vs. 9.9% estimate and 4th quarter 2022 GDP grew by 0.6% vs. 0.4% estimate. The Bank of England (BOE) hiked its policy interest rates by only 25 bps to 4.25%, but with UK inflation still in double-digit territory relative to its peers, the central bank still has some ways to go to bring down inflation.

EUR/USD and GBP/USD closed the month at 1.0839 and 1.2337, respectively.

The Canadian dollar had a rough start as it tracked weaker oil prices and was weighed down by a dovish Bank of Canada (BOC). The BOC decided to pause its hiking cycle for the first time in nine months.

Its policy interest rate stands at 4.5% as its governing council believes that current borrowing costs are restrictive enough to bring inflation down to the 2% level. Canada’s February CPI printed lower at 5.2% vs. 5.4% estimate.

USD/CAD went lower after a bounce in oil prices and the currency pair closed the month at 1.3516. With OPEC+ cutting its supply of oil, this should help the Canadian dollar continue to outperform.

The Australian dollar and New Zealand dollar took opposite paths in March, following the divergent tones of their respective central banks. The Reserve Bank of Australia (RBA) kept its policy rate steady at 3.6% in order to monitor the effect of higher rates on the economy.

AUD/USD closed slightly lower at 0.6685, aided by stronger Employment Change (64.6k vs. 48.5k estimate) and Retail Sales (0.2% vs. 0.1%). On the other hand, the Reserve Bank of New Zealand (RBNZ) hiked its policy rate by 50 bps to 5.25% when markets were expecting only 25 bps. NZD/USD made its way higher to 0.6258. However, the view for both of these currencies is slightly bearish as global investors slowly return to the US dollar.

The Offshore Chinese yuan became a pseudo-safe haven currency as solid economic data helped it stand out in a month when markets could not turn to the US and Switzerland.

China outperformed in its manufacturing and non-manufacturing Purchasing Managers’ Index (PMI) figures, bringing the currency pair down to 6.8703 from highs of 7.0000. This also helped indirectly lift other emerging market currencies in Asia.

FX Traders’ Forecasts

The above forecasts are the foreign exchange traders’ personal opinions and may not reflect the official views of the bank.

The month of March saw a complete reversal in the US dollar after weaknesses were found in the country’s financial system. But after the initial panic, prudent investors were quick to realize that these weaknesses were also brought about by the regional banks themselves.

SVB was an isolated case as the bank’s client base was too concentrated on technology startups. The bank was also a victim of high interest rates after it had to sell some of its bond holdings at a loss in order to fund withdrawals.

Eventually, the US government stepped in to protect depositors, introduce new liquidity tools, and restore confidence in the banking system. Withdrawals from regional banks went to the large banks, which produced better-than-expected earnings for the 1st quarter of 2023. The US dollar may have lost in March but it is starting to climb its way back up.

EARL ANDREW “EA” AGUIRRE  is a Market Strategist at Metrobank’s Financial Markets Sector and has 10 years of experience in foreign exchange, fixed income securities, and derivatives sales. He has a Master’s in Business Administration from the Ateneo Graduate School of Business. His interests include regularly traveling to Japan and learning its language and culture.

Markets underestimated Fed hawkishness as the risk rally that started in January saw a complete reversal in February.

It started when US non-farm payrolls for January exceeded expectations, adding 517,000 new jobs versus 189,000 forecast. The unemployment rate also fell to a 53-year low of 3.4% with two job openings for every unemployed individual, further highlighting the strong labor market.

US inflation indices also surprised everyone by coming out higher than expected. The consumer price index (CPI) grew by 6.4% year-on-year versus 6.2% forecast while the Fed’s preferred inflation gauge, the core personal consumption expenditure (PCE) increased 4.7% year-on-year versus 3.9% forecast. Other economic data releases in retail sales and purchasing managers index (PMI) showed robust business activity, despite elevated interest rates.

However, US dollar may see another challenge to its strength as the bank runs on Silicon Valley Bank (SVB) and other smaller financial institutions in March have investors thinking that the Fed may have tightened too much. European currencies such as the euro and pound sterling are also adversely affected by struggling Credit Suisse.

Month-on-month change of major currency pairs – Feb 2023

It did not help that Japan’s 4Q 2022 gross domestic product (GDP) grew at a much weaker 0.6% versus 2% forecast, as the return of tourists was not able to offset a slowdown in capital expenditure and exports. The Bank of Japan (BOJ) also maintained the status quo of loose monetary policy and incoming BOJ Governor Kazuo Ueda has not made any opposing comments, despite initial hawkish impressions. USD/JPY went from a low of 128.68 in the first couple of days to trending upward all the way back above the 136.17 by February 24.

But with the Japanese yen, traditionally a safe haven currency, Japan could still see flows coming in from troubled banks in the US and Europe.

European Central Bank (ECB) President Christine Lagarde reiterated that the central bank will likely hike by 50 basis points (bps) in March to a 3% deposit rate, even as Euro zone inflation slowed from 9.2% in December to 8.6% in January. However, the EUR/USD still fell from a high of 1.0990 on the first day of the month all the way down to 1.0548 as US dollar strength dominated. The euro’s only reprieve is that the European Union (EU) has been able to completely replace Russian oil imports with supply from US, Norway and Qatar, tempering domestic demand for US dollars.

The pound sterling was still able to put up a fight as United Kingdom (UK) 4Q 2022 GDP grew by 0.4% amidst recession fears. GBP/USD traded from a high of 1.2376 down to a low of 1.1944 on February 24, but bounced back to 1.2022 by the end of the month. January UK inflation also remained elevated at 10.1% which could necessitate further rate hikes by the Bank of England (BOE).

However, both currencies are at risk should issues surrounding Credit Suisse’s stability negatively affect confidence in the European banking system. Immediately after SVB’s closure, Credit Suisse and the Swiss National Bank quickly initiated talks to reassure the public that the bank will not fail.

Optimism on China’s reopening waned as the giant did not have its explosive start and impact on commodity markets as anticipated. West Texas Intermediate (WTI) Crude Oil decreased slightly, from an average price of USD 78.16/barrel in January to USD 76.86/barrel in February. Gold and copper prices also decreased by coming from a sustained rally in January.

Canada CPI continued its descent with the January figure slowing to 5.9% year-on-year, reaffirming the Bank of Canada’s (BOC) decision to pause its hiking cycle at 4.5%. USD/CAD started the month at 1.3291 and has climbed to 1.3647 by the end, driven by a hawkish Fed in contrast with a dovish BOC.

With 4Q 2022 inflation for both Australia and New Zealand well above 7%, the Reserve Bank of Australia (RBA) hiked 25 bps to 3.35% while the Reserve Bank of New Zealand (RBNZ) hiked an even greater 50 bps to 4.75%. AUD/USD fell from 0.7137 down to 0.6726 and NZD/USD fell from 0.6506 down to 0.6185. AUD underperformed the most also because of weakness in the Australian job market.

China was still in a slow start, especially since the nation was coming from its Lunar New Year holidays.

Relations between the US and China soured after a Chinese-operated balloon off the southeastern US coast was shot down after being suspected over spying on US military sites. China claimed the balloon was just a weather-monitoring device that accidentally drifted into US airspace.

The offshore yuan started the month at 6.7195 and ended it at 6.9810. With record low 4Q 2022 GDP growth of 2.9% and January inflation at 2.1%, the People’s Bank of China (PBOC) is in no hurry to be hawkish and might instead consider more growth-centered policy.

The above forecasts are the foreign exchange traders’ personal opinions and may not reflect the official views of the bank.

Our FX traders’ personal views have altered slightly to account for greater US dollar strength than originally anticipated. A strong labor market and sticky inflation will have markets continuously on the lookout for the Fed’s terminal rate. The higher and longer US rates are projected to be, the greater the demand for US dollars and USD-denominated assets. But with the issues surrounding SVB and US regional banks, it remains to be seen whether the USD can hold onto its strength or whether the Fed can remain hawkish for longer.

Earl Andrew “EA” Aguirre is a Market Strategist at Metrobank’s Financial Markets Sector and has 10 years of experience in foreign exchange, fixed income securities, and derivatives sales. He has a Master’s in Business Administration from the Ateneo Graduate School of Business. His interests include regularly traveling to Japan and learning its language and culture.

The first few days of March 2023 saw surprises in Eurozone inflation figures. Both France and Spain saw unexpected increases in their February consumer price indices (CPI), printing at 7.2% and 6.1% year-on-year respectively.

This marks the third consecutive month of rising inflation for both nations as they continue to contend with higher food and services costs. German CPI also stayed sticky at 8.7% year-on-year vs. the same figure in January, despite cooling energy prices due to a warmer winter.

The consolidated inflation figure for the 20-nation bloc Eurozone remained elevated, printing at 8.5% year-on-year vs. 8.6% in January and beating 8.2% consensus forecast. Core CPI, which excludes volatile food and energy prices, even hit a new high of 5.6% vs. 5.3% the previous month, signaling that services inflation in the Eurozone has not yet peaked.

The US dollar is expected to remain steady against other global currency peers, which can lead to more purchases of the US dollar for the first quarter of 2023.

But the overall direction for the year is for the US dollar to depreciate as global central banks continue to pursue their own paths to monetary policy normalization and as the US runs the risk of a possible recession.

Six consecutive months of declining US inflation and inconsistent statements from the Federal Reserve Chair Jerome Powell were enough to bring about a bearish US dollar story in January.

The Dollar Currency Index (DXY), which measures the strength of the dollar against a basket of major currency peers, fell by 1.36%, as markets started to price in an end to monetary policy tightening and possible interest rate cut by the 2nd half of 2023.

However, with a resilient US labor market and inflation just meeting expectations, our foreign exchange traders still expect high US rates and bouts of US dollar strength to persist.