The dollar was higher, rebounding after recent losses, but strong upcoming activity data could be needed for it to continue rising, ING said.
“U.S. activity data needs to do the heavy lifting in a dollar recovery by reviving bond bears.”
Weekly jobless claims and personal spending data could be worth watching, ING said, adding that if Fed officials push back against increased interest-rate cut expectations this could also support the dollar.
Capital Economics said a key question for currency markets over the next couple of years is how expectations for interest rates–and therefore rate differentials between economies–evolve as the coming easing cycle plays out.
“In other words, how far central banks actually end up cutting rates compared to what is already discounted in money markets.”
Capital Economics expects interest rate cuts in G10 economies to be larger than currently discounted in markets.
“As inflation comes back to target next year and growth weakens, we expect policymakers to abandon their ‘higher for longer’ approach and ease policy,” it said, expecting policy rates to revert to roughly neutral setting but not into accommodative territory.