The peak of the dollar will return in 2023, and the 115 will be repeated despite inflation. Iban First experts speak

The peak of the dollar will return in 2023, and the 115 will be repeated despite inflation. Iban First experts speak
The peak of the dollar will return in 2023, and the 115 will be repeated despite inflation. Iban First experts speak
 

The peak of the dollar will return in 2023, and the 115 will be repeated despite inflation. Iban First experts speak


Since its peak in mid-September, the US Dollar Index has been in a phase of decline due to easing inflation which may slow the Fed's tightening cycle.

And with inflation slowing to 7.1%, as shown today in data from the US Bureau of Labor Statistics, the dollar is rapidly losing ground against major currencies such as the euro, sterling, and yen.

According to many economists, the dollar has already peaked in this cycle and will continue to drop towards 100, with a rapid drop in US inflation expected in the coming months, easing market tensions.

However, for others, the decline is only a temporary phase, so the dollar will rise again if the risks associated with a global recession materialize.


Analysts of IBAN First share this view as well

Analysts of IBAN First share this view as well, stating that "we are facing an economic world in which the dollar will remain strong for a long time and may exceed 115."

And based on the real effective exchange rate (which measures one currency's valuation against another), the US dollar is 34% overvalued against the euro, for example. "This is an all-time high," explained Michele Sanson, IBAN's First Country Manager in Italy.

Moreover, in absolute terms, inflation remains a concern. “It is true that US inflation is regressing from the peak it reached last June,” Sanson explained, but the starting point (around 10%) technically leaves the Fed with no choice but to continue to tighten monetary policy in the coming months. (even if growth slows) in order to return to the explicit target of 4%.”

Added to this is the resurgence of COVID cases in China which, according to Eban First, is "another explanation for the dollar's rising domino effect".


Sanson stressed that "while before Covid, China contributed about 30% to global growth, since then the contribution has decreased to 10%. This means that, unlike the 2007-2008 crisis, the country will not bail out the global economy this time. In addition to periods of global economic turbulence. It tends to be synonymous with a strong dollar."

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