As market expectations regarding US key rates have moved upwards, Commerzbank's economists examine the outlook for the USD and discuss what could have been.
The market and the FOMC are generally in agreement on the projections of the future path of interest rates for the first time in recent memory. There was no movement by the FOMC, but rather by the market. The market shifted its expectations on interest rates to the upside, not the FOMC. There are all things that are in favor of the US dollar.
I believe that if we agreed with the new view on the Fed, the current strength of the Dollar would be considered to be sustainable. However, we don't have that information. The Fed watchers continue to predict that there will be no further hikes in interest rates. Because of this, we are expecting that there will not be a sustainable strength in the USD in the foreseeable future.
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