USD Will Gain Upside Against GBP And EUR In Next Few Months - Rabobank
If we look back at the FX market movements from the 12th of July to today, the following G10 currencies have managed to gain the upper hand against the USD: NOK, SEK, and CHF.
Looking ahead, Rabobank economists believe the greenback (USD) will recover its lost ground against these currencies in the next few months.
According to the analysts, the USD will be well-supported throughout 2023. So even if we approach the year-end from today's date, the US Dollar will remain supported. They also added that the USD will start to gain the upside against the GBP and the EUR within the next few months at best.
USD Remains A Safe Haven Asset
In the event of increased risk of US recession, the US Dollar will receive inflows due to its safe-haven asset. So even if the risk appetite disappears, the US Dollar will remain supported throughout 2023.
About the issue of Fed rate hikes, Rabobank analysts said that the interest rates in the US will peak in 2024. So there's still a lot of time for the USD to find support in the form of interest rate differential as other central banks will introduce rate cuts before that.
Given the current fundamentals, Rabobank analysts have set a forecast for the GBP/USD at near 1.26. Similarly, the EUR/USD forecast for the next 3 months is around 1.08. Both of these targets are bearish if we look at the EUR/USD and the GBP/USD current price levels.
If we keep the Rabobank analysis aside for a moment, it appears that the market is expecting the Fed to move away from its tightening policy. If we take that into account, the chances of a well-supported USD for the rest of 2023 will become very slim. But at the same time, we should also consider that other central banks may also introduce rate cuts at the same time.